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Satyam may lay off over 12,000 employees

May 15, 2009 16:17 IST

Image: Media stand outside the headquarters of Satyam Computer
Photographs: Krishnendu Halder/Reuters

Satyam Computer Services, which is now controlled by Tech Mahindra, is planning to lay off 12,000 to 14,000 employees.

Sources said that the new management made a formal announcement before senior management personnel on Thursday on the issue of reducing manpower by up to 14,000 people.

Satyam currently has just over 40,000 employees, of which 19,000 are 'billing employees,' while just over 20,000 are 'non-billing' staff. Almost everyone currently on the 'bench' is in danger of losing employment at Satyam, a source said.

Text: A Correspondent in Mumbai

Satyam may lay off over 12,000 employees

Image: Ramalinga Raju, jailed chairman of Satyam Computer Services
Photographs: PK/CC/Reuters

Of these 20,000-odd non-billing staff, around 12,000 employees are those who work on various projects onsite or the foot-soldiers; while some 7,000-odd are from general management, operations, HR, and other competencies.

Sources say that 80 per cent of the foot soldiers and 50 per cent of the management staff among these will be asked to go on a 'sabbatical', an industry euphemism used to sugar-coat a brutal lay off.

The junior staff that would be asked to take a sabbatical will get a compensation of six months of basic pay, while the seniors would be given three months of basic pay. Basic pay ranges between 25 per cent and 30 per cent of total salary.

Satyam may lay off over 12,000 employees

Image: Anand Mahindra, chairman, Tech Mahindra, and Vineet Nayyar (right), its CEO and MD, address a news conference in Mumbai after winning the bid for a controlling stake in Satyam Computer Services Ltd.
Photographs: Arko Datta/Reuters

Ever since Tech Mahindra took control of Satyam in April, there were apprehensions among the Satyam employees on whether the new management would resort to manpower cuts.

Earlier this month Satyam board chairman Kiran Karnik had said that there had been no layoffs in the company, but it was essentially up to the new owners to take any such decision.

Industry sources say that the decision to lay off almost a third of the workforce points to the new management's desperation to try and get the company back on track following the destruction of its goodwill by its founder chairman B Ramalinga Raju and the continuing economic recession.

The company stands to save substantially through these retrenchments.

Satyam may lay off over 12,000 employees

Image: An employee walks past a banner with signatures of employees expressing the spirit and unity at the Satyam Computer Services head office in Hyderabad.
Photographs: Krishnendu Halder/Reuters

However, others are of the opinion that Tech Mahindra is looking at very short-term solutions to a problem that needs a long-term redressal strategy.

Experts say that the new management might have missed a trick or two in assessing the true strength of Satyam which, they say, lies in its excellence at delivery of complex services.

They say that laying off employees on the bench who primarily are involved with the company's delivery areas might weaken its core strength and turn it into an IT entity that looks mainly at low value-chain business. With giants like TCS, Infosys and Wipro already holding sway over that space in India, Satyam might find the going very difficult, they say.

Notwithstanding Karnik's statement that there had no layoffs at Satyam, company insiders say that the last two weeks have seen the maximum attrition at the company: even more than when the scandal first came to light.

Another source said that the layoffs, or sabbaticals, that will now be forced upon the employees could have come much earlier but for the Lok Sabha elections.

She said that the Satyam issue is very close to the heart of the people of Andhra Pradesh and any retrenchments before the country went to polls could have had a major impact on the outcome of the election.

Satyam may lay off over 12,000 employees

Image: Worried Satyam employees.
Photographs: Reuters

She added that the Congress had earlier intervened and 'not allowed Satyam staff from being sacked to keep the Andhra story going.' But now with the elections over, the axe is about to swing freely in Satyam.

Satyam Computer had plunged into a crisis after its founder B Ramalinga Raju in January admitted to having cooked the books of the company for years.

In April, IT firm Tech Mahindra announced to acquire a 51 per cent stake in the beleaguered firm for Rs 2,900 crore (Rs 29 billion).