Cognizant says 400 senior executives take voluntary separation package

HIGHLIGHTS:

About 400 senior executives have accepted the company's voluntary separation package said Cognizant.

It is estimated that of the 400 people who opted for separation, maximum of them could be from India.

The move will help the company save about US$ 60 million annually.

BENGALURU: Cognizant said 400 of its senior executives have accepted a  (VSP) voluntary separation program which was initiated a few months back, it is expected to result in annual cost savings of about US$60 million.

Cognizant Technology Solutions initiated the voluntary separation programme (VSP) in May 2017, offering up to 9 months of salary as part of it to some of its top-level executives in the United States and India.

The move is part of the Nasdaq-listed company's wider plan to improve margins and employee utilization in a rapidly changing Information Technology environment that has been under pressure due to automation and lower revenue from legacy business.

"In Quarter 2 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 program, primarily from severance cost, including those associated with the voluntary separation program that was initiated and concluded in the second quarter," said CFO Karen McLoughlin  in an post-earnings analyst call last week.

It was not immediately clear how many Indian executives accepted the company's voluntary separation programme offer but considering that more than 70% of Cognizant's workforce is based in India, the numbers could be on the higher side even by predictions.

The company said of the $39 million of realignment charges, $35 million was for the associates who accepted its voluntary separation programme (VSP). It also expects to incur additional cost related to advisory fees, lease termination, severance, and facility consolidation costs for the remaining part of the year 2017.

McLoughlin said in Feb2017 the company aimed to improve cost through optimization, intelligent sourcing, simplifying business unit overhead structure and leveraging corporate function spend to boost operating margin, which is significantly below its Indian rivals such as Infosys, Wipro and TCS.

For the first time, Cognizant also reported a drop of 4,400 jobs in its headcount, pushing its employee strength to 256,800 at the end of June2017 from 261,200 at the end of March2017. The decline was attributed to performance evaluations and the VSP.

"While we will of course carefully manage head count, we will continue to hire and invest in critical skills needed to grow our digital business, and we expect attrition to decline in the coming months," said Cognizant officials.