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HP pay cuts not to affect ex-EDS employees

By Ravi Menon in Bangalore
March 02, 2009 11:54 IST
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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 workforce of the erstwhile Electronic Data Systems Corp. The EDS employees had been moved to subsidiary MphasiS after the former was acquired and merged with HP last year.

However, a good number of 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 the MphasiS' employees, or former EDS employees now with MphasiS, even though the merger of MphasiS with HP-controlled EDS is long complete. But 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," an industry source added.

HP employs around 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 in-house 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 which HP is seriously reviewing. But 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 a revenue decline of 2-5 per cent from $118.4 billion posted in fiscal 2008. For the current year, the company has cut its profit outlook from printers, personal computers and server divisions, on back of lower-than-expected sales posted in the first quarter, and expectations of cutbacks in tech spending on computer services and software.

MNC giants in India like IBM (which commanded a 10.8 per cent share in the Indian tech services market in 2008), Accenture and Oracle have not given any indications of slashing base salaries of their employees. Infosys, however, has intentions to slash variable pay at the executive and a few senior level positions, while Wipro employees have expressed apprehensions of job layoffs and 5-15 per cent cuts in variable pay.
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Ravi Menon in Bangalore
Source: source

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