The IT sector, a cornerstone of modern economies, is not immune to market fluctuations and corporate restructuring. While its growth trajectory often defies broader economic downturns, redundancies in IT have become a reality in Serbia and across Europe due to shifts in demand, technological evolution, and economic uncertainties. This article delves into the redundancy procedure in Serbia’s IT sector, contrasts it with practices in Europe, and explores the causes and potential outcomes of such measures, with real-world examples.
Legal Framework for Redundancies in Serbia
The Serbian Labor Law (“Zakon o radu”) provides detailed procedures to ensure that redundancies are executed lawfully and fairly. Below is an expanded step-by-step overview with nuances tailored to the IT sector.
Employers must substantiate their decision with economic, organizational, or technological reasons. For IT, typical triggers include reduced demand for specific technologies (e.g., legacy software), cost-cutting imperatives, or integration of new tools like AI and automation platforms.
Employers with more than 20 employees must create a formal redundancy program. In IT companies with flat hierarchies, this program often addresses roles like QA testers, customer support staff, or mid-level developers, where automation or outsourcing might replace human labor.
Employers must inform the National Employment Service (NES) 30 days before implementing redundancies. This timeframe allows NES to offer resources such as reemployment programs or career counseling.
Affected employees are entitled to severance pay, based on the employee's length of service. Additional compensation may be negotiated for highly skilled IT professionals, such as developers or project managers, to ensure smoother transitions.
Employers must ensure proper documentation of the redundancy process to avoid procedural breaches, which needs time. The most common cause of lawsuits for unlawful layoff are procedural deficiencies, arising from skipping certain steps in the procedure or failing to comply with statutory deadlines. Legal departments of IT companies are often compelled to commit such oversights due to time pressure imposed by employers.
Causes of IT Redundancies
Startups in Serbia's IT hubs like Novi Sad and Belgrade, many backed by venture capital, face budget constraints due to global funding slowdowns. In Europe, companies like Klarna and Bolt have announced layoffs citing similar reasons.
The adoption of tools like generative AI (e.g., OpenAI’s Codex) reduces the need for human programmers in certain roles, making manual coding or entry-level testing jobs redundant. Many IT firms expanded during the pandemic to meet increased demand for digital solutions. As this demand normalizes, staffing levels are being recalibrated.
Redundancy Practices in Europe: Best Practices and Differences
In Germany, employers must negotiate with workers councils when planning layoffs. In IT, social plans often include opportunities for reskilling employees in cloud computing, AI, or cybersecurity.
On the other hand, in France, redundancies involve justifying layoffs to labor inspectors. In IT, companies frequently mitigate impacts through voluntary departure plans with enhanced severance pay.
In United Kingdom, however, the focus is on fair and transparent selection criteria for redundancies. IT firms like Revolut have used this process to reduce roles in back-office IT operations while investing in growth areas like blockchain development.
Examples of IT Redundancies in Serbia and Europe
Nordeus, a Belgrade-based gaming company acquired by Take-Two Interactive, recently downsized certain non-core teams to align with its parent company's strategic goals. Despite layoffs, affected employees were offered retraining and support for career transitions. Endava, a global IT service company with operations in Serbia, announced redundancies in its testing division, citing automation initiatives. The company, however, retained some employees by transitioning them into roles focused on emerging technologies.
The social media giant Meta announced layoffs in its European offices, impacting roles in its AI and VR divisions. The company provided severance packages and career support for affected employees. The e-commerce platform Zalando reduced its workforce in IT and support roles, citing shifts toward automation and machine learning tools.
Outcomes of IT Redundancies
Immediate cost reductions allow companies to invest in strategic priorities such as R&D or product innovation.The availability of skilled professionals, especially software engineers and data scientists, often strengthens other sectors or startups. For example, laid-off developers from Serbian IT firms frequently find opportunities in freelance markets or with regional tech startups.Excessive layoffs risk losing experienced professionals to international competitors, exacerbating Serbia’s "brain drain" problem.
Procedural errors during redundancies can lead to employee lawsuits, with Serbian courts favoring employee rights in cases of non-compliance.
Serbia’s structured legal framework, combined with lessons from European practices, offers a roadmap for handling layoffs with fairness and transparency. Employers that prioritize retraining, compensation, and compliance not only uphold their obligations but also protect their reputation and foster resilience. By focusing on ethical and forward-thinking approaches, IT firms can navigate redundancies in a manner that benefits both employees and the broader economy.
By Nenad Cvjeticanin, Managing Partner, Cvjeticanin & Partners
