Govt Says No Layoffs, Salary Cuts As Businesses Bear Brunt Of Coronavirus Lockdowns

As the country goes into lockdown due to the spread of coronavirus and Covid-19, the government has now advised private and public companies against salary cuts or layoffs during the pandemic. Further, at present, 70K companies have expressed readiness to deal with the coronavirus.

In a notification, the ministry of labour and employment said that all employers of the public/private establishments are advised not to terminate their employees, especially casual or contractual workers, or reduce their wages. The ministry said that there may be incidents where services of employees or workers may be dispensed with on the pretext of the disease or employees may be forced to go on leave without pay.

Workers taking leave should be deemed to be on duty without any consequential deduction in wages and if the place of employment is made non-operational due to Covid-19, the employees of such organisations shall be deemed to be on duty, the ministry said. The termination of an employee or a cut in salary will only “further deepen” the crisis and will not only weaken their financial condition but also hamper their morale to combat this epidemic, the advisory said.

The similar rules have been put in place for government employees too in a new order on March 23.

Further, as a result of the government directive, more than 70K firms told the ministry of corporate affairs that they are ready to deal with coronavirus crisis. The companies, which have filled a compliance form issued by the ministry, reportedly include most large corporations.

“Reporting compliance on readiness to deal with the Covid-19 crisis is only meant as a confidence-building measure. There is no enforcement action or penalty. The response from businesses has been overwhelming,” the official said.

A survey by FICCI had said that over 50% of Indian companies see an impact on their operations and nearly 80% have witnessed a decline in cash flows due to the pandemic. Besides the direct impact on demand and supply of goods and services, businesses are also facing reduced cash flows due to slowing economic activity, which in turn is having an impact on all payments including to those for employees, interest, loan repayments and taxes,” it said.

It said a combination of monetary, fiscal and financial market measures is needed to help the businesses and people cope with the crisis.

At present, discussions among startups in chat groups and on social media are now more about coronavirus, ensuring business continuity, planning for contingencies and also chalking out the broad conundrums of managing the cash reserves with doubts on future fundraising.

The investors have been advising startups to conserve cash by cutting down costs, which may include human capital. There are already market speculations of upcoming layoffs as businesses need to plan for the runway for almost next 1 year and that would entail severe cost-cutting.