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By | Paul Kunert 14th March 2016 09:29

Staff 'fury' as penny pinching IBM offers legal minimum redundo payoffs

Big Blue 'can't afford to enhance terms', got margins to consider

IBMers at risk of losing their jobs have reacted with “fury” to Big Blue’s confirmation it can only afford to pay the bare statutory minimum in their redundancy packages.

Staff at IBM's Global Technology Services (GTS), Global Business Services (GBS) and UK Labs entered into a 45-day consultation period recently.

Around 400 of them will be asked to work a 45-day notice period before they leave in August.

Unlike past programmes when staff said they were offered better leaving terms, in both voluntary and involuntary exits, this time around payoffs are being calculated on the statutory minimum as required by government.

IBM will give workers under 22 years old half a week’s salary for every full year of service, pay one week for every full year worked for staff between the age of 22 and 41, and one and a half weeks' for every year worked by those at 41 years old or above. The length of service is capped at 20 years, weekly salary at £475 and the maximum payment is £14,250.

The Employee Consultation Committee asked why smaller payments were offered, and in minutes of the meeting for GTS, which The Channel has seen, IBM said “enhanced terms” were not “affordable”.

“UK GTS need to drive at least two per cent margin growth in 2016, and specifically for GTS IS Delivery, this translates to achieving $75m cost take out in 2016. This redundancy programme is one of the labour productivity actions.” the ECC Q&A document – also seen by us – revealed.

Growth in the services market hasn't shown up in recent times, and big ticket outsourcing contracts seem to be few and far between. Cutting costs will let IBM generate more profit on the revenues it turns. Work is being shifted to lower labour cost countries.

IBM said it had considered the impact that statutory redundancy terms might have on future hires, but reckoned “competitive pay and benefits, global opportunities, career and skill development and flexible working options”, were the “key drivers”.

IBM also said it was aware of some customers concerns about offshoring work when setting the selection criteria for redundancies.

Over at GBS, the ECC document written for that unit also contained complaints along the same thread. One employee told IBM it “should be embarrassed at accepting to implement this request from [execs in] the States and even more embarrassed at placing such a proposal on the table”.

IBM thanked the worker - who wrote the post anonymously - for his/her comment and said they “have been noted”

One IBMer told The Channel that “the general mood in the office is one of fury at the imposition of the statutory/involuntary terms, disgust at the betrayal and disloyalty of the GBS leadership, and fear of the future”.

But he said there was “camaraderie” among the wider workforce.

IBM has not told each of the divisions what redundancy terms other parts of the business are receiving, and refused to answer such questions in the ECC.

An insider at UK Labs told us that “voluntary redundancies and no package beyond the statutory minimum” was planned action being taken by the company.

GTS turned over $32.01bn in calendar year 2015, down 9.7 per cent year-on-year, and saw its gross profit margin dip to 37.4 per cent from 39 per cent in the previous year. GBS' revenue of $17.16bn was down 12 per cent and gross profit margin was 28.2 per cent, down from 30.4 per cent previously.

The company is shifting shape, hiring and acquiring in areas where it forecasts stronger growth - cloud, security, analytics, mobile - but the reality of this does not make the redundancy process any easier for those affected. ®

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