Under pressure from activist investor Elliot Management coupled with business headwinds, Cognizant Technology has offered a golden handshake to a select category of senior employees, thereby reducing its wage bills.
Cognizant on Tuesday night sent out mailers to D+ category employees (directors and senior VPs), giving them an option to exit the organisation on a cordial note by accepting either six or nine months' pay as severance package, depending in which category the employee sits. While directors are offered the nine-month packages, AVPs and SVPs will get the six-month deal.
"There could be at least 1,000 colleagues who may be eligible for this," sources said. Cognizant did not comment on the number of people who fall into the category. "We are offering a voluntary separation incentive to some eligible leaders, representing a very small percentage of our total workforce. It is related to our overall company strategy to accelerate our shift to digital and to deliver high-quality, sustainable growth," a Cognizant spokesperson said.
Cognizant has been under the market's lens after its breakneck speed growth over the past two decades started to stutter. It lowered its growth guidance thrice last year. For 2016, the company registered revenues of $13.5 billion, up 8.6% from $12.42 billion for 2015. However, it raised guidance for 2017, estimating revenue to be from $14.5-14.84 billion.
Employees of Cognizant are also feeling the heat of slower growth. For the first time, the best performers received only 95% of their variable pay for 2016, significantly lower than the usual 150% to 200% they used to earn earlier, indicating the headwinds the sector faces. Cognizant, which has over a third of its workforce in India, has been the bellwether in the IT industry in variable payouts. The company has given over 100% to top performing employees between 2009 and 2015, when it raced ahead of its peers in the industry. In 2015, top performers bagged up to 190%, significantly higher than 135% for the prior year.