Cognizant plans another round of layoffs to slash costs, says report

Cognizant is readying to let go of a few hundred employees, as it plans another round of layoffs as part of its strategy to slash costs, the Economic Times reported on Friday, citing sources with knowledge of the matter. Further, the report said that more ways of cutting spending were on the anvil at the IT major.

A source with knowledge of the matter told the financial daily that this was part of the appraisal process, which was "getting stricter". The source said, "If you were a marginal performer or have not been allocated (a project), then they would look at beginning a separation process." According to the report, the number of layoffs would be in a few

hundred, and employees who have more than eight years of experience would be targeted.

As reportedly recently, Cognizant is exercising "tighter control" over expenses through a number of measures, including a slower pace of hiring and reduced travel expenses, as the company looks to re-invest in talent and digital solutions to drive growth. The US-based company told news agencies that it took "targeted actions" at senior-level executives in the second quarter, in a move that is expected to result in $65 million of annualised savings.

"...in the second quarter, we took targeted actions at the senior levels of our pyramid to simplify our organisation structure. These actions are expected to result in $65 million of annualised savings with approximately half of that to be realised in the remainder of 2019," Cognizant CFO Karen McLoughlin said at a recent earnings call. She added that in the next two quarters, the company expects to further reduce overall costs through a number of actions.

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A Cognizant executive also told ET that the number of layoffs was being evaluated and that it would depend on growth as the quarter progresses. Further, the report said that the IT major has already suspended non-essential travel and taken other actions to cut spending.

Cognizant had slashed its revenue growth forecast earlier this year, and said that its headcount addition had overtaken its revenue growth, which had led to narrowing margins, the report said. The company had 288,200 employees as of June 30, which was a seven per cent increase from 268,900 a year earlier. Further, citing Cognizant's annual report for 2018, the report said that the company had close to 281,600 employees at the end of 2018, out of which 194,700, or 69 per cent, were in India.

At the same time, an unnamed source told ET, the company has increased the time between giving of offer letters to new employees and assigning their joining dates. The source added that the company was looking to balance the work it has with the staff strength. "The joining dates are being calibrated to ensure that utilisation is maintained. There is a strong focus on cost control," the source told ET. On a Facebook group called 'Cognizant Freshers', a group of people have said that they were given offer letters in March, but were yet to receive a joining date, added the report.

ALSO READ: Cognizant Q2 net profit rises 11.6% to $509 million, cuts revenue guidance

"We cannot be commenting on every speculation in the marketplace. It would be important to note that Cognizant's Q2 revenue came in at the higher end of our guided range and beat consensus EPS estimates," a Cognizant spokesperson told ET through email. "We have already onboarded several thousand students who are currently undergoing training in Cognizant Academy, and the rest will be onboarded in a staggered fashion, as is the process every year. Cognizant has a long history of honouring all campus offers and there is no reason to believe that this year will be any different," the spokesperson added. The financial daily reported that the company had said that it had begun onboarding freshers from the month of June.

Last week, it was reported that Cognizant might increase the variable pay component in its employees' compensation structure.

According to reports, the company is restructuring itself under the new CEO, Brian Humphries. This includes reducing the management layers and rethinking its sales and business strategy. Reworking the compensation structure is another measure in a roadmap aimed at making the company 'fit-for-growth'. Earlier, Humphries had said that changes to compensation were being considered.