Impacts of layoffs: Calls for transparency, fairness and compassion in AI-era layoffs

The widespread adoption of Generative Artificial Intelligence (GenAI), coupled with the global economic downturn, has led to surprise layoffs and forced resignations across sectors. As of 3 October 2025, 91,314 tech employees had been laid off by 208 companies, according to layoffs.fyi.

Industry experts describe the trend as an unfortunate byproduct of automation and hyper-competitive, profit-driven corporate strategies. During the Covid pandemic, many firms carried out abrupt layoffs through Zoom meetings, vague emails, or even system lockouts--cases seen at X (formerly Twitter), Alphabet Inc, Better.com, Frontdesk, and several others. Others, however, took a more empathetic approach, offering severance packages, insurance coverage, and extended notice periods.

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'The HR dilemma'

Human capital experts emphasize that HR's role becomes crucial in ensuring dignity during layoffs. "This is a very sensitive topic and needs to be handled with utmost honesty so employees know that this is truly a last resort and the company did not have any other option," said Neeti Sharma, CEO of TeamLease Digital.

Anil Agarwal, Founder and CEO of Incruiter, noted that clear communication, counseling and reskilling, support can help transform a painful exit into one marked by dignity.

Similarly, Sonica Aron, Founder & Managing Partner, Marching Sheep, outlined three ethical standpoints: Transparency in communication, fairness in process, and compassion in execution. "Decisions must be based on clear business requirements, not on personal biases," Aron added.

'Psychological fallout'

Beyond financial instability, job loss often brings emotional turmoil--self-doubt, anxiety, and feelings of rejection. Psychologist Nirali Bhatia shared the case of a senior professional who was promoted as country head, only to have his department terminated months later.

Bhatia described a case in which a senior professional was promoted to country head at another office. Just a few months later, management announced structural changes, leading to the termination of both him and his department.

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Psychiatrist Harish Shetty added that while stigma around layoffs has reduced, mid-career employees often face deeper psychological challenges.

Bhatia said that transparency and empathetic communications are critical. "It would be even more pertinent if employer helps with career transitions, reskilling, and counseling to minimize the entire psychological fallout of the affected employee," she added, "Laid off employees should focus on rebuilding and bouncing back. Dwelling too much on the setback can lead to overthinking, which in turn may trigger anxiety and a sense of failure".

'Legal perspective'

Advocate Harpreet Singh Saluja explained that under the Industrial Disputes Act, 1947, Indian law distinguishes between layoffs and retrenchment.

Section 2(kkk) defines a layoff as a temporary suspension of work due to reasons such as a shortage of raw material, machinery breakdown, or natural calamities. Section 25C further provides that employees are entitled to 50% of their wages during the layoff period.

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In contrast, Section 2(oo) defines retrenchment as the permanent termination of employment for reasons other than voluntary retirement, superannuation, disciplinary action, or ill-health. Forced resignations fall under retrenchment and, if carried out without government permission, are often treated as unlawful terminations.

"Essentially, when employees are forced to resign, companies bypass safeguards--no notice, no compensation, no accountability. That is why such resignations are treated as unlawful terminations in disguise," said Saluja.

'TCS layoff'

Tech behemoth Tata Consultancy Services (TCS), this year, announced plans to cut 2% of its workforce, roughly 12,000 employees, as part of restructuring. Unlike many peers, TCS is reportedly offering severance packages of up to two years’ salary to long-serving staff.

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The company said affected employees will be receiving outplacement support, notice periods, and mental health resources under its “TCS Cares” program.

“In keeping with the values of our company, those affected by our recent initiative to realign skills have been provided care and support as is due to them in each of the individual circumstances," TCS told Storyboard18.