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þ In Sept 2008, due to global financial crisis, many companies collapsed and many
others suffered revenue losses forcing them to resort to cost-cutting measures as
the economic activity slowed down resulting into reduced amount of work in
companies. This resulted in massive job-cuts across industries.

þ Even though job cuts in India due to recession were limited as the large percentage
of the country was engaged in agricultural activities - a sector that is not affected
by global financial crisis. However, due to global economic recession, the growth of
IT industry declined considerably as an estimated 61% of the revenues of Indian IT
companies came from the US, where global economic crisis originated. With the
global economic meltdown, there was a decline in the number of projects for the
Indian IT companies. Yet, as the Indian IT industry was hit by the global crisis, the
Indian IT companies resorted to employee layoffs as a cost-cutting measure.
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˜s against the situation of peak of IT boom in India when the demand and supply
ratio was almost 5:1, during recession, most of the IT companies decided to do
away with the surplus employees as there was a dearth of projects.

þ The first target for the lay-offs were people on the bench and under-performers.
þ ˜dopted strategies like increasing the variable component of the wage as against
the fixed component
þ Constant monitoring of employee performance to ensure higher productivity and
laying off the surplus staff.
þ In some cases, IT professionals were forcibly given poor ratings based on their
performance and instead of putting them on performance improvement
programmers (PIP) as had earlier been the practice, they were asked to quit
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þ In the meanwhile, Satyam Computer Services Ltd. was hit by the internal financial
scam due to fraudulent activities of its founder and former chairman, B. Ramalinga
Raju (Raju) along with the global financial crisis. The company suffered huge
revenue losses because of this and decided to sell-off the controlling stake of the
company which in ˜pril 2009 were bought by Tech Mahindra.

þ Satyam, under Tech Mahindra (a joint venture between British Telecom and
Mahindra & Mahindra Ltd. acquired a stake of 31% in Satyam for approximately
$351 million. On June 21, 2009, Satyam Computer Services Limited was renamed
Mahindra Satyam and on June 23rd 2009, C.P. Gurnani was appointed the CEO of
Mahindra Satyam.
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þ While the situation of employee lay offs in the Indian IT companies was dismal,
Satyam after being taken over by Tech Mahindra had adopted an innovative
scheme called the Virtual Pool Program (VPP) to address the problem of surplus
workforce and to be able cut costs while retaining talent.

þ Satyam had around 10,000 surplus associates on board and needed to identify
solutions wherein both the costs of the company and associates' jobs could be
saved. VPP was more welcome news as against the layoff of 10000 associates out
of the total associate strength of about 41, 622.

þ ˜ccording to this plan, the surplus associates of Satyam were put in a reserve pool
with reduced salaries, effective June 2009 to be able to lower costs and at the
same time retain key talent.
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1. It was a one time exercise applicable to Satyam associates based in India who had
not been on billable accounts for a period spanning 3 months or more as well as
the support resources.
2. 7000-10000 of Satyam associates were expected to be put in VPP with a reduced
pay i.e. basic pay (which is around 35%-40% of the total salary), Provident Fund
(PF) and Medical Insurance (MI).
3. They were kept in a reserve pool for a defined period of time, depending on the
position of the associates in the company. Senior associates had been put in VPP
for 4 months and junior associates for 6 months without disturbing their
employment status.
4. They would be considered for regular employment at a later stage based on the
business needs in which case, the salary and other terms and conditions prior to
VPP would be reinstated for them.
5. They would be able to access Satyam's online learning and skill enhancement
programmes and will be assisted by way of financial and career guidance and
counseling.
6. They could also avail the outplacement support being provided by Satyam through
its tie up with placement companies.