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Does Satyam have cash to pay salaries?

January 09, 2009 16:37 IST
Last Updated: January 09, 2009 20:48 IST


Beleaguered Satyam [Get Quote] management, struggling to set its house in order, is facing a major challenge to fight rumours and disinformation particularly relating to employees and their salaries.

The day started with a 'rumour' by some Satyam employees that there was an internal e-mail that talks about layoffs and uncertainty about salaries over the next two months, but it was later found that there was no such internal communication.

"No such e-mail exists," a Satyam spokesperson told PTI, adding that because of the uncertainty of the situation there are all kinds of rumours floating. But the management is doing everything in its ability to reach out to its employees and ensure that their future is safe.

Asked if the rumours could also have been generated by comments made by acting CEO Ram Mynampati that though the company had ensured the December salary for its 53,000 strong workforce, liquidity was a cause for concern, she said: "It looks like he may have been misinterpreted."

Debunking all the speculation and rumours about the employees, the spokesperson said that the workforce was intact and there was no plan to downsize.

However, Satyam did not confirm if it has enough cash to pay the salaries of all it employees.

Employees at the company said on condition of anonymity that they were hearing about imminent lay-off of people who were sitting on the bench or were close to completing their assigned projects. Besides, those being retained would be asked to take substantial salary cuts, they added.

At the same time, global HT consultancy firm Hay Group's Practice Leader Mark Thompson said that employees would suffer the most from the fraud.

Global HR consultancy firm HayGroup's Practice Leader Mark Thompson said: "Based on past experience . . . as with Enron, Worldcom and the Mirror Group, it is likely to be the employees who will suffer most from the fraud perpetrated by their bosses."

In early 2000, the collapse of energy trader Enron had left thousands of people out of work, another 8,500 had lost their jobs at accounting firm Arthur Andersen; and Tyco eliminated 15,000 employees in February.

Analysts at technology research firm Forrester said employees and clients would soon desert the company amid competitive wooing by the rivals.

The research firm added that it has already been consulted by over half-a-dozen rivals of Satyam on competitive strategies to be adopted to take over the business from the clients of the beleaguered IT firm.

Satyam on Wednesday made a shocking disclosure of fudging of accounts by its founder Ramalinga Raju, who then quit as chairman, leaving an uncertain future for the company and its 53,000 employees.

Raju, in a statement on Wednesday, said Satyam's profits had been massively inflated over many years but no other board member was aware of the financial irregularities.

The timing of this news is the most unfortunate part about it given the fragile state of the global economy, Hay Group's Thompson said.

The scandal will damage corporate India's reputation, may have implications for the whole BPO and IT Services sector and would certainly give some 'hotheads in the US a little more ammunition to use against the logic of outsourcing to India,' Thompson said.

"However, there will not be a long term impact on the employer-employee relationship.

Instead, we may get tied up with a series of reviews into corporate governance and a host of new regulations attempting to prevent this kind of thing from happening again," Thompson added.

Another global staffing services firm Manpower said at this point of time 'employees should assess their current skill sets and explore the opportunities in sectors showing positive hiring intent like energy, telecom and mining.'

Executive search firm Headhunters India's CEO Krish Lakshmikanth has said the company might lay off over 10,000 employees by the next month as it has little cash to pay salaries.

"It is most likely that Satyam will cut 10,000 jobs next month as the company is left with no cash to pay the salaries.

The current fiasco is likely to put pressure on salaries, which may reduce by 10 per cent due to the surplus of about 20,000 people in the jobs market," Lakshmikanth said.

Lakshmikanth said till Tuesday evening there were about 7,800 Satyam employees who had posted their resumes on job sites and by Wednesday afternoon, it rose to 14,000.

Satyam's interim CEO Ram Mynampati said on Thursday the company has taken care of the salary for December, but its liquidity position was not encouraging.

IT-BPO employees union UNITES said, "We are in touch with the senior and top-level management of Satyam, all kind of rumours are doing the rounds but we still do not have any clarity on the isuue."

"It is unlikely that there will be any layoffs as the new management is trying to portray that all is well in Satyam.

Moreover, this being the election year, even if the company do not have money government might chip in to rescue the employees," UNITES general secretary Karthik Shekhar said.

According to the latest Manpoer Employment Outlook Survey hiring intent in IT & ITeS sector has gone down drastically this quarter, compared to the last quarter, but the space is showing a positive hiring intent, with net employment outlook of 23 per cent for the first quarter of 2009.

"In India, IT and ITeS sector has been a low-cost and high-quality player and will surely emerge big again after the crisis," Manpower India added.

Meanwhile, UNITES India, a union of ITeS professionals, has warned that over 50,000 IT professionals in India may lose their jobs over the next six months as the situation in the sector is expected to worsen due to the impact of global meltdown on the export-driven industry.



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