Cognizant spends $49 mn on laid off staff, and $29 million to retain key employees

As part of a business overhaul, Cognizant spent approx. $49 million on the employees it laid off and invested $29 million to retain the key employees in the December quarter. The American multinational services provider had incurred a 39 per cent fall in net profits, that is, about US$395 million, in the December quarter due to restructuring expenses. While it spent $4 million in paying severance packages to its employees, it also paid $27 million to retain top talent as part of its realignment programme. It incurred a cost of $45 million in separation costs under the ‘Fit for Growth’ programme, along with about $2 million spent on retaining its key employees. However, in 2020, the information technology company expects a growth of two to four per cent.

Brian Humphries, CEO, Cognizant, has been focussing on measures to invest and push growth. Last October, the Company had decided to lay off 7000 employees and also wind up its content moderation unit, which rendered an additional 6000 people jobless. This was part of a major plan to cut costs and concentrate on key businesses.

Although many senior executives left during the realignment programme, the Company rolled out the retention programme at the right time, to stabilise the situation.

In the last fiscal, Cognizant’s net profit fell 12.38 per cent to US$1.8 billion, even though revenue was 4.1 per cent higher than the previous year, that is, US$ 16.8 billion.

However, due to the right measures being put in place and discipline being ensured across departments throughout the last fiscal, the fourth quarter witnessed strong free cash flow and satisfactory operating performance. This year too, the focus will be on improving the cost structure and investing in growth.