Cognizant Technology Solutions is planning to retrench 6,000 – 10,000 employees to reduce costs and maintain profitability. CTS employs more than 2.6 lakh employees globally out of whom 1.8 lakh (about 72%) work in India.
It is not that Cognizant suffered major losses from its operations. It earned $13.6 billion revenue in 2016 (8.6 % growth over the previous year) with a profit of $1.55 billion (compared to $1.62 billion in 2015). Each dollar of this revenue and profit is earned with the hard work of its employees. But CTS management considers employees as disposable commodities, to be milked for maximising profits to the shareholders and thrown away as waste when they desire.
Cognizant retains a considerable part of employees’ salary and pays them out as ‘incentive’ at the year end. This part of the salary is specified as variable pay. The criteria for deciding proportion of variable pay to be paid is whether the company meets the original profitability goals set in advance by management.
For example, in February 2017, the company said it would raise its non-GAAP operating margin target to 22% from its historical 19-20% target. That means, if the company fails to meet 22% operating margin for 2017, employees variable pay will be swallowed up, even if the revenues go up and after tax profit remain above 10%.
This year, even the best rated employees will get only 95% of variable pay they earned. That means even the best performers are denied a portion of their pay.
Not only this.
Not everyone gets full amount of variable pay as decided above. Using an unscientific appraisal system, Cognizant divides employees into several buckets. This appraisal system is filled with arbitrary decisions, office intrigues and promotes unhealthy enmity among employees to the benefit of the management. IT companies use this system to divide, isolate employees and prevent them from voicing their concerns as a collective.
This year those CTS employees placed in bucket 4 will get none of the variable pay. Even with the company’s logic employees with Rating 4 meet some of the expectations, hence it is unjust to deny them a considerable part of their salary. The variable pay system itself is one of the ploys used by the management to oppress the employees and keep them in tenderhooks.
We understand that supervisors are instructed to place specified number of employees in bucket 4. Some employees who were given 2nd rating by the immediate supervisor were arbitrarily placed in 4th bucket by HR. These employees will not only lose their hard earned variable pay component, but also will be marked for retrenchment as part of Cognizant management’s cost reduction/profit maximisation plan.
In February, Cognizant had announced that it would do share buybacks worth $3.4 billion over two years. On March 14 it entered into an accelerated $1.5 billion share buyback agreement with Barclays Bank PLC, Citibank N.A., and UBS AG, London Branch. The company will fund the repurchases using cash and its existing credit facility.
Note the names CTS chooses to shower billion dollar gifts – Barclays, Citibank, UBS with net worth of billions of dollars. Compare these names with the names of employees marked for pay cut and retrenchment by Cognizant.
On the one side, global billionaires who stand to make big bucks by investing in CTS shares. On the other side, the hard working employees who work round the year to make the billions for CTS. It is clear whose interests CTS management represents.
IT employees in general and CTS employees in particular should join hands to face the challenging times as the company managements plan to throw employees overboard to benefit the shareholders.
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