By Wasana Nadeeshani
(Commonwealth) _ According to Labour Ministry sources, Sri Lanka’s business operations are now decreasing and are projected to worsen in the coming months as private sector enterprises struggle for survival in the aftermath of the COVID-19 outbreak and the ongoing economic crisis.
These enterprises are suffering supply side concerns at now and most of those companies were obliged to cut employment via layoffs, non-renewal of employment contracts, and freezing new recruitments, a recent Labour Department poll has indicated.
Businesses are decreasing their operations despite the severe economic crisis yet several respondents from the production of textile and clothing industry said that they were able to boost the job count. Government-imposed limitations on imports have led to the closure of several private firms.
Unprotected laborers suffer the most. Currently, more than 1.7 million temporary employees in the private sector face substantial salary cutbacks and layoffs. Mahendra Perera, President of the National Trade Protection Council (NTPC), stated that SME’s used to pay interest rates ranging from 14-18-20% per annum for borrowings from banks and financial institutions, but this will climb to 21- 25-27% or more with the rate increase.
These businesses are presently experiencing financial concerns as a result of revenue loss and difficulty in importing raw materials owing to the dollar crisis and rupee depreciation, as well as a drop in cash flow and sales, he noted.
“Employment also decreased, notably in the food and beverage manufacturing industry, mostly owing to the cessation of casual employees,” the Department reported in its survey findings.
Meanwhile, the study indicated that employment in the services sector had continued to shrink through July due to a block in recruitments and non-renewal of current employment contracts amid weak economic activity.
45 percent of the firms that replied indicated a need for labor in 2022. Nearly half of these are located in the Colombo district, with the Western Province accounting for three-quarters of the total.
The tech business is shedding employment at a rate comparable to the early days of the Covid-19 outbreak. According to Challenger, Gray & Christmas Inc., a consulting firm that tracks job layoffs in telecom, electronics, hardware manufacturing, and software development, the industry disclosed 52,771 cuts in November, for a total of 80,978 this year. It is the highest monthly total for the industry since the business began collecting statistics in 2000.
After a difficult start to the epidemic in 2020, digital businesses benefitted from a spike in e-commerce spending and remote employment flourished, spurring a hiring binge. Things appear to be different now. In recent earnings releases, Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and others missed projections, sending shares plummeting. Others are bracing for unpredictable cryptocurrency markets or a sudden drop in demand necessitating significant cost cuts. As the pandemic passed and people resumed their normal activities, demand declined, and many of these employees’ positions became obsolete. Moreover, growing levels of inflation, worries of a recession and an overall unstable economy made the general people more cautious with their purchasing habits, which directly contributed to the earnings of these huge firms falling down.
A hiring freeze occurs when firms stop recruiting new employees and filling vacant positions. The freeze might be used in place of or in addition to layoffs and furloughs. Other cost-cutting measures that the corporation may take include limiting salaries, eliminating incentives, or decreasing benefits and perks.
In times of economic crisis, employers are more inclined to adopt hiring freezes and other cost-cutting measures. So, if you know your firm is experiencing financial issues or is going through a restructure, you should expect a hiring freeze. The same is true of economic crises such as recessions. The simple truth is that recruiting suffers when business is slow.
