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Infosys cuts jobs after losing major contract, poor Q1 show

Last week, employment of 500 staffers was terminated for non-performance.

Written by Pranav Mukul | New Delhi |
Updated: August 22, 2016 9:28:46 am
infosys, infosys q1, infosys jobs, jobs at infosys, RBS, infosys RBS, infosys RBS contract, infosys lay offs, infosys job cuts, infosys q1 report, infosys q1 growth, business news Analysts have estimated that the cancellation of this contract, worth an approximate 0 million per annum, would impact the company’s revenue guidance for FY17 by 70-80 basis points.

As many as 500 employees of software developer Infosys Ltd were asked to leave the company on issues of non-performance, shortly after the country’s second largest IT firm suffered two major blows in the form of poor quarterly results and the cancellation of a major contract where close to 3,000 employees were deployed.

An Infosys source, on condition of anonymity, said that the employment of 500 staffers at the company’s Hyderabad and Bengaluru campuses, was terminated last week as they were not able to maintain the stipulated working time of an average 9.15 hours per day.

“These 500 people include some manager-level staff as well, but comprised mostly junior level employees who were not put on any project,” the source said, adding that the firm had recently become more stringent on employees without any work and called for the staff to become more proactive in seeking internal jobs when not assigned a project.

However, in response to an e-mail sent by The Indian Express posing specific questions on the development, an Infosys spokesperson said that the number of employees fired “are very low” and “is not connected with any business situation that is not in the control of the employee.”

The Infosys spokesperson said: “Infosys prides itself on being one of the best employers, with a high degree of commitment to professional norms and performance, while providing our employees a good work life balance. We offer a high amount of flexibility to our employees so that they can achieve this easily.”

“We have a progressive policy for the rare instances where some of our employees do not meet expected standards of performance or commitments. After adequate counselling, those found consistently deviating from expectations are asked to find alternate employment. This applies to employees across levels and is not connected with any business situation that is not in the control of the employee,” the spokesperson added.

However, it may be noteworthy that the recent cancellation of Infosys’ contract with Royal Bank of Scotland (RBS) is said to affect some 3,000 Infosys employees that were assigned on the project.

The project was won by Infosys in 2013 to build the applications for Williams and Glyn (W&G), a new standalone bank that RBS planned to set up separately in the UK. On August 5, RBS said it had aborted the plan citing difficulties in integrating W&G computer systems to mirror that of RBS. To this effect, Infosys said that it would make an orderly ramp down of the resources deployed, and the employees instead of being asked to leave would be assigned to other projects.

The company source cited above said that while some of the people on the RBS assignment may get absorbed in other Infosys projects, there weren’t enough to take in all 3,000. “This, in turn, would bring down the billability of these employees in their next appraisal, making them look bad for no fault of theirs,” the source added.

Analysts have also seen the development as a negative for the company and have estimated that the cancellation of this contract, which was seen to be worth an approximate $300 million per annum, would impact the company’s revenue guidance for financial year 2016-17 by 70-80 basis points.

“…our rough cut calculations suggest that the likely impact of this business loss will be ~$70-80 million in FY17 and ~$150-200 million in FY18. This ramp-down is likely to impact Infosys’s FY17 revenue guidance by ~80 bps,” brokerage firm Emkay Global said.

The contract cancellation development was adding insult to the injuries of Infosys, which, in July, reported disappointing results for the June quarter, making investors bearish on the company’s stock. In a note to its clients last week, CLSA India said it increased the underweight stance of Infosys by three percentage points due to continued employee turnover and cancellation of the RBS deal, which raised questions on its guidance for the current financial year.

While announcing its June quarter earnings, Infosys had also reported a 370 basis point increase in its attrition rate for the three month period. “Infosys did a commendable job in past few quarters of lowering attrition from 26.4 per cent to 17.3 per cent. Hence, the sudden jump by 370 bps in Q1FY17 (April-June) is really worrisome. While management suggested a fall of 200 bps in outperformers’ attrition, we believe increase in low employee demand scenario is worrying and will be under our watch list,” Edelweiss Securities had said in a report.

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