When HP CFO Cathie Lesjak said last week that HP would be cutting another 5% from its workforce, beyond the last target of 55,000 people, she said something odd.
The additional cuts wasn’t expected to increase HP’s costs.
And now a person close to the company has given us some insight into how that might be done.
Some HP employees in the chronically troubled HP Enterprise Services business unit are being offered jobs at a different consulting company in lieu of severance.
The hiring company is Denver Colorado-based Ciber, HP confirmed to us. Ciber is an IT consulting company that resells HP products and has a labour partnership with HP. It’s best known for helping companies install and work on SAP, Oracle and Microsoft products. (We’ve reached out to Ciber for comment and will update when we hear back.)
An HP spokesperson told us:
HP reached an agreement with a strategic labour partner, Ciber to allow more flexibility in managing labour demands. There are a small number of employees who will move from HP to Ciber, and become contractors to HP’s Applications Delivery Services organisation. HP will continue to own and manage the end-client relationship and overall service responsibility.
HP told employees affected by this arrangement that they are being “terminated” and will not be offered the standard one week of pay for each year of employment, our source told us. HP will pay for unused vacation time only in states that require such payments by law, we were told.
Ciber will be sending out job offers in the next few days. HP employees have 48 hours to accept or decline.
This is a particularly difficult decision for long-term employees, who could wind up joining the new company with no seniority. But it’s also a fairly creative way for HP to downsize its workforce and save money on the termination costs, while not completely chopping employees off at the knees.
And HP has done a somewhat similar thing before. In 2012, GM hired the 3,000 HP ES employees that were running GM’s information tech systems on an outsourcing contract.
We don’t know what kind of salaries Ciber is offering. The company seems to pay its employees market rates, according to Glassdoor and IT is a good-paying career. Salaries at Ciber range from $US76,000 to $US130,000, its employees report to Glassdoor.
We’ve been hearing rumblings for days that the latest round of layoffs at HP were different and might involve no severance. One person reported on TheLayoff.com that remote workers were being particularly targeted, something we heard from other employees, too.
HP CEO Meg Whitman essentially banned remote work back in 2013.
A person close to the company told us last month that remaining remote workers in the HP ES division — people who lived too far to commute — were being pressured to move so they could drive in, or driving three hours each way. This even though some regional HP offices didn’t have enough desk space to accommodate them all.
Whitman has also publicly talked about replacing HP ES workers with more automated systems and off-shoring jobs to lower-cost regions
HP ES, HP’s consulting unit, has been troubled for years as outsourcing has gone out of favour while cloud computing is on the rise.
Revenue has been shrinking quarter by quarter and profit margins have been all over the map, from 4% to 6%. Throughout 2015, Whitman has told investors she is stabilizing the unit and promised to bring margins up to 7% – 9%.
(We’ve reached out to HP for comment and will update when we hear back.)