Cognizant sheds 400 senior jobs in downsizing exercise

Cognizant Technology Services is reported to have cut 400 senior executive positions through a voluntary separation programme (VSP) initiated by the company a few months ago.

The VSP, offering up to nine months of salary as part of the package to some of its top-level executives in the US and India, will result in annual cost savings of about $60 million, according to the company.

It is estimated that a significant number of these jobs were based in India, where more than a third of the company's 2.5 lakh employees work.

The move, aimed at improving margins and employee utilisation, comes at a time when the IT industry is facing a slowdown due to pressure from automation.

While the trimming workforce has become common, this time around, the loss of senior jobs involving average salaries above Rs6 lakh per month underlines the gravity of the ongoing crisis.

Cognizant's chief financial officer Karen McLoughlin had, during a recent investors' call, had said that companies would make substantial savings by tightening headcount and increasing automation.

''In Q2, we took some actions that will improve our cost structure and operating margins while allowing us to continue to invest in the business for growth. These actions resulted in approximately $39 million of charges related to the realignment programme, primarily from severance cost, including those associated with the voluntary separation programme that was initiated and concluded in the second quarter,'' McLoughlin said.

The exact number of Indian executives who accepted the offer is not clear but with more than 70 per cent of its global workforce in India, the numbers could be on the higher side, says a Times of India report.

''Of the $39 million of realignment charges, $35 million was for the roughly 400 associates who accepted our VSP. We expect approximately $60 million of annualised savings as a result of the VSP,'' McLoughlin said.

Cognizant has shed a total of 4,400 jobs in the second quarter (April-June 2017), which pushed its employee strength down to 256,800 at the end of June from 261,200 at the end of March. The decline was attributed to performance evaluations and the voluntary separation program.

Cofnizant, however, will continue its selective hiring plans to add to its critical skill pool needed to grow the digital business, thus limiting the pace of attrition, he added.