Cognizant is reportedly planning to sack 400 in senior management — severance pay reduced to three months

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  • IT major Cognizant is planning to eliminate 400 senior executives in a staggered manner, according to a TOI report.
  • This includes directors, vice presidents, senior directors, Associate vice president and other mid and senior management roles.
  • Recently, Cognizant reportedly offered the bench employees in the US — who are not presently working for any client — a voluntary separation package.
  • The company says that the realignment move is aimed at improving the cost structure and effectiveness of the business.
In April, American IT multinational Cognizant bumped up wages by 25% for almost two-third of the workforce in India as a ‘sign of gratitude.’ A month later, the IT major is now planning to eliminate 400 senior executives in a staggered manner, according to a TOI report.

This includes directors, vice presidents, senior directors, associate vice president and other mid and senior management roles.

“In a people-intensive business like ours, effectively managing our workforce is a key element of aligning our cost structure with revenue. We have 290,000 employees serving clients worldwide. Like all services firms, we routinely manage supply and demand with a bench of unutilised employees. What distinguishes us is that we are enhancing our bench policy by offering additional cash and extended health benefits to those who are or will become unutilised and for whom we unfortunately do not foresee future opportunities,” Cognizant spokesperson told the Times of India.
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This comes in the backdrop of the latest announcement for Cognizant’s employees in the US. Cognizant reportedly offered bench employees — who are not presently working for any client — a voluntary separation package.

"As the term 'voluntary' suggests, employees have an option of taking it. The offer has been made largely to US employees as they are on high payrolls and includes cash and health benefits like long term insurance policies, etc. Complete salary of two months is being offered in the package. For now, the offer has only been made to US-based employees on bench. The company may look at extending that to other employees in onsite (international) locations," CNBC reported citing sources.

However, this is not new to the company. In 2018 too, the company introduced a voluntary separation scheme for senior executives where it offered 12-month salary and stock benefits depending on the employee’s tenure in the organisation.
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The company says that the realignment move is aimed at improving the cost structure and effectiveness of the business. In fact, the severance pay is also reduced to three months instead of five months, along with one week pay for all the years of service.

In 2019, Cognizant paid $22 million dollars to the senior executives who were asked to leave — apart from the $147 million dollars incurred in employee retention, realignment etc.

“We think these changes are causing a mix of wanted and unwanted attrition at senior levels of Cognizant. Wanted attrition has occurred in cases where the staff was not sufficiently performing or serving as ideal role models for the rest of the organization. Essentially, we think some senior-level attrition has been needed to push Cognizant toward a performance-oriented culture, pivot Cognizant’s skills toward digital, and better optimize its cost structure,” said Rod Bourgeois of US-based Deepdive Equity Research.
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However, the company is bullish on hiring digitally skilled freshers this year. Announcing the March quarter results, CEO Brian Humphries said that the company will hire for 20,000 entry-level positions.

See also:

Three ways TCS, Infosys and other IT giants in India are trying to cut costs — but it’s not going to increase their profitability

Here’s how TCS and MeritTrac solutions aim to stop candidates from cheating during online exams
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