Silent Layoffs: Workforce Restructuring Strategy Nobody Talks About

What is the cheapest way for a company to reduce its payroll? Not by firing people outright, but by making them want to leave.

An Economic Times report states that India’s $315-billion technology and software services industry could eliminate 25,000-35,000 jobs this year, with 10,000 to 15,000 professionals estimated to have already lost their jobs through silent layoffs till May 2026. Oracle, Meta, TCS — mass layoffs by tech giants — made it to media headlines. In the background, a quieter wave of exits appears to have unfolded, one that many employees now describe as silent layoffs.

Silent layoffs: What is it?

Silent layoffs have no universally accepted definition. The term appears to have emerged from employee usage. It is commonly used to describe low-visibility exits, where companies reduce staff strength without a formal layoff announcement. Broadly, the term is used in two ways. One usage refers to a pure PR exercise, where employees are terminated with severance but under conditions of confidentiality, often with non-disclosure agreements in place.

In this article, I use the other widely used definition of ‘silent layoffs’: strategies that reduce headcount by nudging employees to resign with the intent to avoid large severance payouts and formal restructuring charges. These strategies are often packaged as ‘workforce realignment’ or ‘role rationalisation’ programmes rather than presented as a formal reduction in force. This is how some organisations quietly manage exits without booking large one‑time termination costs. It should not be confused with quiet firing, where a manager creates an unsupportive environment for a specific individual in the hope that the person quits. Silent layoffs may sometimes use similar tactics, but at an organisational level rather than purely individual level.

Because there is no formal template for silent layoffs, companies can adopt this strategy in many ways. These may include cancelling work-from-home arrangements through mandatory return-to-office policies, freezing hiring, abruptly transferring employees across teams, redefining roles with tougher KPIs, or reshaping positions in ways that narrow future growth. Not every PIP (Performance Improvement Plan) signals a silent layoff. But if a team suddenly sees a sharp increase in the number of employees placed on PIPs, it may point to a broader workforce strategy at play.

Why do companies opt for silent layoffs

Announced mass layoffs can intensify public glare on the company’s activities. Media, business partners and investors scrutinise these announcements, often looking for hidden clues on the financial well being of the company. Investors, in particular, want to understand the root cause of such terminations.

Was the company over-hiring — and if so, does management even understand how much resource a project truly needs, or worse, does it simply not know how to deploy the resources it already has? Is a project being wound down midway, and if leadership is admitting this project didn’t work, what does that say about the judgement behind the next one it is about to bet on?

Some layoffs this year even prompted speculation on whether the company overspending elsewhere — AI infrastructure, marketing, or expansion that hadn’t yet paid off — was the real driver behind the cuts. And because mass layoffs invite this kind of scrutiny, management often prefers the silent layoff route — one that lets the company control its own narrative about its condition, rather than have investors construct one from a headline number.

Announced mass layoffs trigger media coverage and, increasingly, public backlash on social media — the kind that turns into negative PR and damages the employer-brand. When a company publicly puts a number to the layoff, for example 15,000, it is providing media, market and even competitors a permanent reference point for the future. Silent layoffs, on the other hand, avoid all these problems – no confirmed layoff numbers in public domain and no social media trends.

In case of these announced mass layoffs, the New Labour Codes require a company to pay a worker one month’s notice (or wages in lieu), standard retrenchment compensation, and a contribution to the Worker Re-skilling Fund. However, not all employees automatically qualify for these payouts — managerial, administrative, and highly paid supervisory roles fall outside the Code’s definition of ‘worker.’ It’s a distinction worth pausing on: in everyday usage ‘employee’ and ‘worker’ mean the same thing, but under the Code, they don’t.

For a large segment of the white-collar workforce, notice periods and separation terms are instead governed by the employment contract and the relevant State Shops and Establishment Act. Mass layoffs trigger mandatory payouts for workers covered under the Code, and often a discretionary severance for white-collar staff. Silent layoffs convert what would have been retrenchments into resignations or non-renewals instead.

It is interesting to note here that Labour Codes definition of retrenchment specifically excludes voluntary retirement, non-renewal of contracts – the very method by which silent layoffs are being implemented.

Further, under mass layoffs, if it is part of a restructuring programme, the financial audit process requires that these retrenchment costs, if they meet certain thresholds, need separate disclosure in financials to highlight its financial impact. Voluntary exits not only save on the retrenchment payouts but also avoid the requirement for additional retrenchment related disclosure. However, SEBI’s BRSR, which has different reporting parameters to the financial audit parameters, requires disclosure of voluntary exits, among other metrics.

The company can save not just the additional retrenchment costs, which can be quite a significant amount if the number of employees exiting is high, but also avoid the compliance reporting and regulatory scrutiny that comes with Labour Code regulations. Please refer to my next article on severance which explains the components and cost of severance.

The dark side of silent layoffs

When companies start putting employees on PIP or start revising job roles, the workplace can quickly become one of uncertainty and instability. Lack of transparency results in employees playing the guessing game – do we stay or do we go. As psychological safety erodes, attrition rises. And I believe that the first to go are more often the top performers – the ones who are confident of landing a good replacement. The ones on PIP, who were the original targets under this scheme, continue with added responsibilities to their roles. In trying to filter out the wrong employees, the company filters out the right ones — a reverse brain drain of its own making.

Such practices rarely stay contained to the office. Digital platforms like Glassdoor and LinkedIn start reflecting employee experiences - reviews mentioning sudden PIPs, unexplained role changes, abrupt transfers. The reviews start making a pattern – the discreet strategy becoming public enough to dissuade future hires from joining.

When a short-term headcount strategy is formulated in the boardroom, its long-term risks are rarely foreseen. In time, it can leave a company short of the talent it needs to carry its own momentum forward.

The burden of optics

A formally laid-off employee is perceived very differently by the job market than one nudged out through a PIP or transfer. One is seen as a victim of circumstances; the other, as someone who simply refused to scale up. The company’s strategy gets recast as a personal failure, one that can quietly shape the offers that follow.

And there is no cushion to soften this blow. Since retrenchment, by definition, excludes voluntary exits and non-renewal of contracts, these employees are not entitled to ‘retrenchment’ pay. Both employees end up in the same place: out of a job. But the one let go through formal restructuring walks away with a bigger pay cheque than the one who leaves through a role change or PIP.

This piece was not written to convince a boardroom to choose differently. Somewhere, an employee is going through a PIP or a sudden transfer, quietly drowning in uncertainty of it. If this piece reaches even one such person, and helps them see the pattern instead, I consider my work done here.

Footnotes pertaining Industrial Relations Code, 2020:

1. Ordinary retrenchment requires minimum 1 month’s notice or wages in lieu of notice to the worker. For “large industrial establishments” (300+ workers), the notice requirement is 3 months’ notice or wages in lieu. (Section 70(a))

2. The standard retrenchment compensation is 15 days’ average pay for every completed year of service. (Section 70(b))

3. For each retrenched worker, the employer must contribute an amount equal to 15 days’ last drawn wages to Worker Re-skilling Fund. The Government will transfer such funds to the worker within 45 days of retrenchment. (Section 83)

4. Industrial establishments employing less than 300 workers can lay off, retrench or close without prior government permission.

5. Industrial establishments employing 300 or more workers, prior permission of Government is required to lay off, retrench or close the establishment.

6. This definition is to be read in conjunction with point 4 and 5 above. Layoff is a condition where the employee is on the rolls but not given work due to circumstances like shortage of raw material. Whereas retrenchments is when the employee is no longer on the rolls of the company and is formally terminated.

7. The retrenchment compensation and Reskilling Fund provisions apply to ‘workers’ as defined under the Code, which excludes employees in managerial, administrative, or higher-paid supervisory roles. Many white-collar IT and tech-sector employees may therefore fall outside these specific protections even where the broader Code applies to them as ‘employees’ — applicability is fact-specific and depends on role, designation, and compensation.