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    Cognizant says 400 senior executives take voluntary separation package

    BENGALURU: Cognizant Technology Solutions said 400 of its senior executives have accepted a voluntary separation programme (VSP) it initiated a few months back, which it expects to result in annual cost savings of about $60 million.

    The company initiated the VSP in May, offering up to nine months of salary as part of it to some of its top-level executives in the US and India.

    The move is part of the Nasdaq-listed company's wider plan to improve margins and employee utilisation in a fast changing IT environment that has been under pressure due to automation and lower revenue from legacy business.

    "In Q2 we took some actions that will improve our cost structure and operating margins while allowing us to continue to invest in the business for growth. These actions resulted in approximately $39 million of charges related to the realignment program, primarily from severance cost, including those associated with the voluntary separation program that was initiated and concluded in the second quarter," CFO Karen McLoughlin said in an post-earnings analyst call last week.

    It was not immediately clear how many Indian executives accepted the company's offer but considering that more than 70% of Cognizant's workforce is based in this country, the numbers could be on the higher side even by conservative estimates.

    The company said of the $39 million of realignment charges, $35 million was for the associates who accepted its VSP. It also expects to incur additional cost related to advisory fees, severance, lease termination, and facility consolidation costs for the remaining part of the year.


    McLoughlin said in February the company aimed to improve cost through optimization, intelligent sourcing, simplifying business unit overhead structure and leveraging corporate function spend to boost operating margin, which is significantly below its Indian rivals such as TCS and Infosys.



    For the first time, Cognizant also reported a drop of 4,400 jobs in its headcount, pushing its employee strength to 256,800 at the end of June from 261,200 at the end of March. The decline was attributed to performance evaluations and the voluntary separation program.


    "While we will of course carefully manage head count, we will continue to hire and invest in critical skills needed to grow our digital business, and we expect attrition to decline in the coming months," she said.


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