Sri Lanka’s information technology (IT) and business process management (BPM) sector remains a vital pillar of the economy, employing approximately 170,000-175,000 professionals and generating around USD 1.5 billion in annual exports. With national ambitions to grow the digital economy to USD 15 billion by 2030, supported by significant government investments in digital infrastructure through the 2026 budget, the industry holds immense potential. Yet, this growth trajectory is overshadowed by a recurring issue: widespread layoffs in tech companies, frequently coinciding with active recruitment efforts and investments in branding activities. This contradictory practice downsizing in certain areas while hiring elsewhere has sparked significant concern among IT professionals in Sri Lanka, highlighting tensions between short-term cost management and long-term workforce stability.
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The Layoff Landscape in 2025: Global Trends and Local Impacts
The year 2025 marked a challenging period for the global tech industry, with layoffs ranging from 120,000 to over 250,000 positions across hundreds of companies, depending on tracking sources. These reductions were driven by post-pandemic adjustments, economic pressures, and the accelerating adoption of artificial intelligence (AI), which prompted restructuring to eliminate redundancies in legacy roles.
In Sri Lanka, several prominent IT firms mirrored this global trend, implementing notable staff reductions throughout the year. Employee discussions and industry reports describe these layoffs as often abrupt, affecting hundreds in individual organizations and contributing to broader uncertainty in Colombo’s tech hubs. While no official nationwide tally exists, the pattern aligns with international decisions impacting local operations, where global efficiency drives lead to localized job cuts. This has amplified frustrations, particularly when reductions are perceived as prioritizing financial optimization over employee security.
Decoding the Hiring-Layoff Paradox
A key point of contention is the simultaneous occurrence of layoffs and recruitment. Many affected companies continue to advertise job openings on platforms like LinkedIn, targeting specialized skills in areas such as AI, cloud computing, and data analytics. This paradox is not isolated but reflects a strategic shift common in the tech sector: “rightsizing” by reducing headcount in traditional or administrative functions while investing in high-growth domains.
Business rationale often includes correcting overhiring from the pandemic boom, enhancing profitability amid investor demands, and reallocating resources toward innovation. Globally, AI integration has been a major factor, with thousands of roles streamlined through automation, freeing budgets for emerging expertise. In Sri Lanka, rising operational costs, talent competition from regional markets, and global economic volatility further incentivize this approach. However, the optics cutting jobs while pursuing new hires and non-core initiatives can erode trust, leading to higher voluntary turnover among remaining staff and challenges in attracting talent.
This dynamic poses broader risks for Sri Lanka’s economy. As a top net foreign exchange earner after remittances and garments, instability in the IT/BPM sector could deter investment and exacerbate brain drain, with skilled professionals seeking opportunities abroad.
Pathways to Ethical and Sustainable Workforce Management
To mitigate these challenges, tech companies and policymakers can adopt proactive strategies that balance efficiency with employee welfare. Greater transparency is a starting point: clear communication about restructuring reasons, through internal forums or advance notices, can reduce uncertainty and preserve morale.
Investing in reskilling emerges as a practical solution. By upskilling existing employees in high-demand areas like AI and cybersecurity, firms can retain institutional knowledge while minimizing external recruitment needs. Global examples demonstrate success with internal training programs, and in Sri Lanka, collaborations with universities or government-backed initiatives could make this scalable and cost-effective.
Strategic planning tools, such as data-driven workforce forecasting, help avoid boom-bust cycles in hiring. Companies could also review expenditure priorities during restructuring phases to align with employee-focused outcomes. On the policy front, the 2026 budget’s allocation of approximately Rs. 30–35 billion for digital projects provides an opportunity for public-private partnerships, including incentives for training and fair labor practices.
Encouraging mandatory consultation periods or enhanced severance support could further promote ethical standards without hindering agility. As AI disruptions continue into 2026, with potential moderation in overall layoffs, proactive measures will be crucial.
In conclusion, the hiring-layoff paradox in Sri Lanka’s tech sector underscores the need for evolved management practices in a rapidly changing industry. By prioritizing transparency, reskilling, and strategic alignment, companies can foster resilience, reduce turnover, and contribute to sustainable growth. This approach not only addresses immediate employee concerns but also strengthens Sri Lanka’s position in the global digital economy, turning challenges into opportunities for innovation and stability.
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