India’s tech solutions company Satyam Computer Services, which experienced some trying times recently because of internal financial frauds, has decided to cut staff costs. It said today (June 11) that up to 10,000 employees will be affected. 

The company has announced that it is launching a one-time program, effective this month (June 2009), which is aimed at addressing staff costs.

The program, called Virtual Pool, is applicable to people based in India. It asks them to take time-off from work on a reduced pay structure – for up to six months – while they continue to retain their employment with the company. 

“The recessionary climate that has seriously affected the IT industry, in addition to the unprecedented set of events that Satyam faced recently, has added to its pressures,” says Kiran Karnik, chairman of Satyam’s board.

The trouble had begun at Satyam last year when on Dec. 16, Satyam had announced that its Board of Directors approved proposals to acquire a 100% stake in Maytas Properties and a 51% share in Maytas Infra. Maytas is engaged in infrastructure construction and asset development. The total payment for both the acquisitions was estimated to be US$ 1.6 billion – $ 1.3 billion for the 100% stake in Maytas Properties and $ 0.3 billion for the 51% stake in Maytas Infra. 

On this move, Satyam’s shares had dropped by nearly 40%, as investors were angry over a technology company spending money on the construction outfit in which Satyam’s management has stake. And questions were raised about Satyam’s corporate governance. 

Also, World Bank had banned fraud-laden Satyam and a couple of more Indian companies to do business with it.

As a damage-control measure, India’s Ministry of Corporate Affairs had disbanded the Satyam’s Board in January and appointed three new directors. The move was aimed to win back the confidence of shareholders, employees, and other stakeholders in the local and global markets.

As the company has been facing some severe cash crunch after the fraud was exposed, it was desperately looking for sources for funds. Selling of its stake was one of the options. In April, it selected Venturbay Consultants, a subsidiary of Tech Mahindra, to acquire a controlling stake in the company. The move helped Satyam bring Rs. 1,756 crore (nearly US$ 351 million) into the company.

However, because of its perpetually weak market position, the layoffs were always in the cards. In fact, in January My Techbox Online had warned Satyam employees about this expected maneuver, suggesting them to form software cooperatives. (Read: Satyam Employees can Form Software Cooperatives)

But most preferred to sit on time bomb. And now they’re being asked to go when the job market has already gone from bad to worse. The sweetly flavored “Virtual Pool” program will target people who have not been in billable roles for three months or more and will include support resources.

The affected people will receive their basic pay, in addition to Provident Fund and medical insurance. The employment status continues undisturbed and based on business requirements, employees may be recalled and reinstated at full pay and benefits, says the company.

Also Read:
Who’s Good, Who’s Bad after Satyam and Wipro
Satyam Employees can Form Software Cooperatives
Solutions for Solutions Providers
Why Blame Satyam Only?

For information on India, visit India Market.

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About Rakesh Raman

Have extensive editorial, content management, and integrated communications experience and have worked as a senior tech journalist, analyst, and columnist with different newspapers, magazines, and Web/online properties in India.

4 responses »

  1. Kalyani says:

    Aah “Virtual Pool Program” is a foil paper packaged “LAY OFF”…..just rolled out within a month of the TechM take over…..seems very opportunistic approach by the new owners….plus, most importantly, the VPP list is being prepared by Top Heavy Managers, who are worth few crores and have been responsible for the Company’s unplanned manpower. They have retained themselves and victimizing the mid-level and junior level Professionals…..TechM management has been taken for a big ride, by this vested, indirect favoritism shown by top leaders of the Company. SHAME on THEM….not only greedy about making wealth but have made surplus CURSES on themselves and their prosperous families….Welcome to the world of invisible frauds still prevailing inside SATYAM…..TechM bosses, watch out….

    • why should people be laid off because that Raju turned out to be a thief? Its not the employees fault that clients discontinued their contracts, is it? and more importantly, if so many clients discontinued, how come Satyam still reported making a profit with all the employees? Which is correct? It cant be that the company made a profit and yet needs to fire people.

      It appears that the new satyam management has inherited raju’s knack for lying and forging results then. I say Raju and amir kasab are of the same level and both should be hanged in a public square.

  2. Sudhir says:

    Well, this is not done….Government before getting elected, screamed that it will protect the interests of the 50,000 employees of Satyam. At the end of it, recently it was stated that Satyam has about 42,000 employees as on date, that straight away gets 8000 people off that the Government planned to protect and now new owners want to do this, and with what criteria. Was it the fault of the employees, that the company’s HR planned so badly, to recruit to spoil careers and lives of many….hope this doesnt lead to depression and suicides !!! Is the Government listening ?

  3. Kalyani says:

    Aah “Virtual Pool” – a foil paper wrapped “Lay Off” Program….its the Senior most guys who call themselves “strategists” who created massive wealth being in Satyam for years together who have made the list of employees in VPP program. They have RETAINED THEMSELVES, they are the ones who are the major cost to the company. SO much favoritism and vested interest !!!! Bad planning by previous HR heads, and poor junior level staff are being victimized. Why cant Managers take ownership for bringing the company to this bad shape and step down than to get cursed by middle-class staff and families. TechM bosses didnt even bother to look at criteria of choosing people – all seems opportunistic approach !!! Will the company prosper when the staff machinery is rattled. The retained employees may still feel insecure and will look out….Lose more people Satyam !!! Heard a second list is being made in 2 months time !!Beware Satyam Staff….

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