The current management of scam-hit Satyam Computer Services, which on Thursday said it is not confident of meeting the salaries of its employees for January, is understood to be toying with the idea of retrenching anywhere between 6,000 and 10,000 staff (associates as the company prefers to call them).
Satyam claims to have slightly over 50,000 associates. However, employees who sought anonymity say that actually 47,000 people are working with Satyam’s flagship IT services business. The employees’ claim is based on the information given in the company’s intranet portal.
Prior to the company’s disgraced former chairman, B Ramalinga Raju’s, admission on Wednesday to a falsified balance sheet, Satyam was believed to have enough cash ($1.15 billion, which, according to Raju’s letter, is now non-existent) to pay its employees for eight-nine months, even assuming it did not get any additional revenues, according to an Edelweiss Securities report. But now the situation is very different.
A Satyam spokesperson termed any talk of retrenching employees as a “speculation by vested interests”.
However, mid- and senior-level employees (on condition of anonymity) explained that the first to be affected are the 6,000-odd employees across all its centres who are on the bench, and who were expecting to get into projects once the impact of the slowdown starts fading away.
The sources also noted that freshers and junior employees — who have completed less than two years at Satyam — might be spared the axe. A senior project manager at Satyam said: “The freshers are required to give a minimum of two-year bank guarantee worth Rs 2 lakh to the company, which ensures they cannot be axed or resign prior to the two years.”
In many cases, freshers were encouraged to take loans for bank guarantees from the State Bank of India on the behest of Satyam. “I had taken a loan of Rs 2 lakh from SBI on a monthly instalment of Rs 2,500, which is deducted from my salary. If I am given the pink slip, then the bank guarantee would have to be paid by the company that does not even have working capital. So, I guess I am safe,” said a seven-month-old Satyam employee.
The other vulnerable, according to the sources, are the mid-managerial project managers and team leads with experience ranging between three and seven years. “People who are associated with support projects or projects that are nearing completion are most exposed to getting the boot as there might not be work from next month onwards for them,” said another Satyam employee.
Employees, however, appear to be taking no chances. Many employees are understood to have applied for jobs though friends, acquaintances, HR department or even placement agencies. Some are also experiencing heavy pressure from their family members and friends to search a new job as soon as possible.
The stalemate has also affected the work at four of Satyam’s premium development centres in Pune. Even project managers and senior level executives are busy searching new opportunities, which has paved way for their subordinates and junior level staffers to concentrate on job search.
Satyam Computers has four development centres in Pune, which jointly have a headcount of more than 8,000. The company wanted to increase its headcount at the newly inaugurated special economic zone (SEZ) facility to 5,000 over next eight months.”There is extreme pressure on me. My parents and family members have asked me to quit as soon as possible even if I do not have a job in hand. The ‘Satyam’ tag might have an adverse impact to a job aspirant in near future,” said an employee who has been working here for last two years.
(With inputs from Krishna Mohan and Kaustubh Kulkarni)
To improve margins, utilisation
Analysts say the company has no option but to lay off additional fat. The layoffs, though very unfortunate, will help Satyam not only help them increase their employee utilisation but also prop up their revenue per employee and operating margins.
According to B Ramalinga Raju’s letter, the EBIDTA is a mere 3 per cent, but most analysts outrightly rubbish this. “How can an IT company operate on these margins?” asks Avinash Vashishta, CEO of Tholons.
He notes the average operating margins of the top IT firms range between 20 and 26 per cent, while the average employee utilisation is around 80 per cent (offshore and onsite). However, assuming the company’s operating margins are around 3 per cent, the retrenchment of around 10,000 employees would help shore up the margins to around 15-20 per cent since the revenue per employee would shoot up.