The IT sector may once again be on the verge of a new wave of layoffs. According to reports, Cognizant, a major US IT company, is considering drastically cutting its workforce – a move that is expected to affect a large number of its employees in India. It is being reported that under its “Project Leap” initiative, the company is planning to lay off around 12,000 to 15,000 employees worldwide. A report by *Moneycontrol* suggests that most of these layoffs are likely to take place in India.
On April 29, the Nasdaq-listed company announced that it expected to spend between US$230 million and US$320 million on employee severance payments as part of its new initiative, “Project Leap”. This means that as a result of the layoffs, the company will receive US$230 million to US$320 million (approximately ₹ 1,900 million) in total compensation. Expenses may have to be incurred between ₹ 2,600 to ₹ 2,600 crore*. However, the company has not yet released any official figures regarding the exact number of employees who will lose their jobs.
Why will India be most affected?
Cognizant currently employs more than 357,000 people worldwide, of whom more than 250,000 are based in India. Since the salary and severance packages of employees in India are lower than those in developed countries, the largest portion of these employee retrenchments is likely to be from India.
Why is the company planning layoffs?
According to reports, the company is focusing on moving away from its traditional operating model and adopting a new organizational structure – one that is AI-powered and “lean” (less expensive) by nature. Under its current “Pyramid Model”, the company is no longer interested in operating with a large workforce made up of a mix of senior and junior level employees. Due to the decline in demand in the IT sector, the company aims to cut non-essential expenses and invest in new technology to reduce costs.