HP paycuts not to affect most ex-EDS staff

Technology giant Hewlett-Packard’s move to slash employee compensation and benefits across geographies in lieu of job cuts will not affect an estimated 3,000-plus employees of the erstwhile Electronic Data Systems Corp (EDS) who were moved to EDS subsidiary MphasiS after the former was acquired and merged with HP last year. However, a good number of former EDS India employees who were transferred to HP India will not be so lucky, industry sources said.

“The pay cuts at Hewlett-Packard worldwide will not be applicable to MphasiS employees or former EDS employees now with MphasiS, even though the merger of MphasiS with HP-controlled EDS is long complete.

Of course, HP CEO Mark Hurd’s plan to effect pay cuts, between 2.5 per cent and 5 per cent, will affect all EDS employees who were moved to HP. Only the 3,000 or so EDS employees who were moved to MphasiS’ rolls last year will escape the salary cut on HP’s account,” an industry source added.

HP employs an estimated 60,000 people in India, including former employees of EDS which it had acquired for $13.2 billion in May last year.

HP’s ADM services division, which handled a large number of inhouse projects for the company till the merger with EDS happened last year has been strengthened considerably by the merger and subsequent knowledge exchange with EDS’ consulting teams, sources said, adding that this has also lead to duplication of roles.

“The issue of duplication of roles in certain positions like consultant and project lead is something HP is reviewing seriously, though no firm decision has been taken on how to tackle this at the employee level,” a source said.

After missing its first quarter earnings expectations, HP had announced worldwide cuts in compensation and benefits at its earnings call on February 18. CEO Mark Hurd’s salary is set to be reduced by 20 per cent, executive council members’ base pay by 15 per cent, while other executives will be subject to a pay cut of 10 per cent, HP said in a letter to its employees. Most employees will see pay cuts between 2.5 per cent and 5 per cent depending on their job levels.

HP’s net profit for the first quarter to the end of January fell to $1.85 billion from $2.13 billion a year earlier.

Revenues for the quarter posted the slowest growth of all time, rising 1 per cent to $28.8 billion.

HP has forecast revenue decline of 2-5 per cent from $118.4 billion posted in fiscal 2008. The company has cut its profit outlook for the year on the back of its printers, personal computers and server divisions posting lower-than-expected sales in the first quarter and expectations of cutbacks in tech spending on computer services and software.

Global giants in India like IBM, which held a 10.8 per cent share of the Indian tech services market in 2008, Accenture and Oracle have not given any indications of slashing base salaries of their employees. Wipro employees have expressed apprehensions of firings and 5-15 per cent cuts in variable pay, while Infosys has indicated its intentions to slash variable pay at the executive and a few senior level positions.