Global IT major Cognizant, which had a workforce of around 260,000 including 155,000 employees in India as of last year, has reportedly asked several of its senior employees to accept a severance package of upto nine months of salary and leave on a cordial note. Cognizant said it is taking this step to ensure that its workforce is appropriately aligned to deliver sustained, high-quality growth as part of its plan to accelerate the shift to digital. Cognizant assured no disruption of day-to-day operations due to the top level employees being shown the exit door.
Cognizant did not disclose the number of employees who have been offered this voluntary separation option but said it aims to wind up the process by the end of the second quarter. A Cognizant spokesperson said it represents a very small percentage of its total workforce. “We continue to recruit and hire across all of our practices and are expanding facilities globally, ensuring that we have the right expertise to help our clients. As part of these initiatives, we are offering a voluntary separation incentive to some eligible leaders, representing a very small percentage of our total workforce,” the spokesperson said.
“This voluntary initiative is being communicated to management-level associates – from director-level to senior vice president – and eligibility is at the discretion of Cognizant leadership,” the spokesperson added. The spokesperson did not disclose any further details regarding the compensation but assured it was fair and gave a positive experience for those who decided to leave the company.
NASDAQ-listed Cognizant had also lowered variable pay of its employees for 2016. Commenting on the variable pay cut, a spokesperson had in March said, “Cognizant has a performance-based culture and our variable payout is a function of the company and individual performance. In previous years where we outperformed our goals, we paid significantly above the target payout. In 2016, we missed our original goals and our variable payout is reflective of that.”
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These incidents are emblematic of the quagmire of slowing growth and environmental difficulties that lay ahead of the Indian information technology companies.
On one hand, reducing client spends and pricing pressures are squeezing margins of the companies, while on the other hand the increasingly tougher visa regimes, with proposed restrictions on work visa norms by countries like the US, UK, Singapore and Australia, are making it more difficult for the companies to carry on their operations in these countries in a cost-effective manner.
Earlier last month, Wipro, India’s third-largest information technology service provider has sacked 300-600 employees to “align its workforce with business objectives, strategic priorities of the organisation and requirement of its clients”.
Earlier, India’s bellwether IT company Infosys offered a bleak outlook for the year ahead, with the full fiscal 2017-18 revenue growth guidance at 6.1-8.1% in dollar terms. Further, a rising rupee is putting more pressure on the earnings realisation of these companies, which earn a bulk of their revenues from the US.
To cope up with the rapidly evolving landscape, Indian IT companies are investing heavily in automating processes in their traditional businesses such as BPO, application management and infrastructure management to improve operating margins.
This is leaving these companies with surplus manpower, as an increase in automation allows for fewer people – to be deployed only for advanced roles, as tedious tasks can be put on automation to improve efficiencies.
In the past one year, Infosys, the second-largest Indian IT company, has reportedly retrained and reassigned around 9,000 employees from low-end roles to more advanced roles. Further, it cut its hiring to just 5,700 people in the first nine months of 2016, compared to the 17,000 employees it hired in the previous year. In the December quarter, Infosys’s total employee strength actually declined – an extremely rare occurrence for it. The total strength fell by 66 to 199,763.
Tech experts have been cited expressing concerns that proposed hyper-automation and Artificial Intelligence may paint an even bleaker future for the sector, as when implemented these would drastically reduce the need for human resources.