Why Layoffs Are Not Part of India’s Corporate Culture – And Shouldn’t Be

The recent layoff of 660 employees at Freshworks has reignited debate over corporate values in India. Zoho founder Sridhar Vembu publicly criticized Freshworks' decision, questioning why profitable companies with significant cash reserves opt for mass layoffs instead of exploring ways to redeploy or retain talent. The "hire-and-fire" culture, deeply embedded in American corporate practices, is being adopted by Indian companies at the expense of employees and stands in stark contrast to traditional Indian business ethics. This article explores why these practices are incompatible with Indian values and why policy reform is crucial to protect the workforce from such business whims.

Importing a Misfit Corporate Culture

Traditionally, Indian work culture emphasises stability, loyalty, and mutual respect, where the employer-employee relationship is based on more than a transactional exchange. The idea that companies can shed hundreds, if not thousands, of jobs overnight disrupts this relationship, fostering insecurity and undermining workforce morale. Unfortunately, many Indian companies have adopted this American-style “hire-and-fire” culture, especially in the technology sector, where international investor expectations often overshadow local ethics.

In the U.S., the “hire-and-fire” mentality has roots in at-will employment laws and a shareholder-focused approach. But India’s corporate culture is rooted in social responsibility, family-like work environments, and a sense of loyalty. Here, a layoff is seen as a last resort rather than a quick solution to maintain profit margins. Embracing a culture of mass layoffs, especially by companies that are not financially struggling, is unsettling and contradicts Indian values.

Unjustifiable Layoffs in a Profitable Company

In the case of Freshworks, Vembu highlighted that the company is financially healthy, with $1 billion in cash reserves and a steady 20 percent growth rate. From an ethical perspective, letting go of 13 percent of the workforce under these circumstances raises questions. With enough resources for a $400 million stock buyback, one wonders why the company didn’t invest in another business avenue or redeploy employees instead of taking the easy route.

This approach reflects a lack of vision, as Vembu pointed out, and raises doubts about corporate responsibility. Could Freshworks—or any other highly profitable company—adopt a similar layoff strategy if it operated in Germany or France, where labour laws demand fair severance, retraining, and consultation with unions? Many European countries enforce stringent labour laws, protecting employees from rapid job cuts in profitable companies. Unfortunately, India’s relatively lenient labour laws make it easier for companies to cut workforce numbers without significant financial or social accountability.

The Need for Responsible Employment Policies

Indian companies, particularly those operating within India and employing Indian talent, have a responsibility to respect the values of their workforce. An “employee-first” culture should be the standard, especially in companies that enjoy healthy profit margins. As Vembu pointed out, companies like Zoho have opted to remain private to prioritise employees over shareholders, showing that profitability can be achieved without sacrificing employee welfare.

If layoffs occur in financially secure companies, it not only affects individual employees but creates a ripple effect, shaking community stability, impacting families, and often leaving entire teams uncertain about the future. For India, where job stability is essential, a focus on redeployment or investing in new business directions should become a priority.

Time for Policy Intervention to Ensure Fair Practices

The Freshworks case is a clear call for government intervention. India’s labour laws regarding severance pay and layoffs must be strengthened to prevent companies from treating employees as expendable. Instituting mandatory severance, ideally at least six months, would be a significant step to ensure the burden of corporate decisions isn’t disproportionately placed on employees. Companies should also be held accountable to ensure layoffs are truly a last resort, particularly when they aren’t facing significant financial strain. This kind of reform would provide a safety net for employees and discourage hasty downsizing by requiring companies to carefully assess their options.

In conclusion, layoffs in the absence of genuine financial distress go against India’s cultural and ethical values, impacting not only those let go but also undermining the trust and stability essential in corporate relationships. The time has come for Indian companies to develop corporate policies that align with Indian values—respect for individuals, long-term relationships, and a commitment to collective growth. Protecting employees from profit-driven layoffs would establish a resilient and ethical corporate landscape, ultimately strengthening both the economy and the social fabric.