Bitten Once, Tech Co Tweaks Norms for Severance Pay
Some senior officials, however, said to have refused to sign on the revised clause
Bengaluru: Infosys is said to be reworking its severance pay clause to avoid controversies like the one stemming from the package paid to former CFO Rajiv Bansal.
A few senior management officials are said to have already turned down a request from the company to agree to a threemonth pay in case they have to leave involuntarily. They have refused to sign on the revised clause in the service contract, multiple sources told ET.
According to sources, the company does not want the huge payouts given to Bansal and former chief compliance officer David Kennedy to be seen as a precedent for future severance packages. “There are discussions on how to standardise severance packages. There is a need to create a standard process,” a source with knowledge of the discussions told ET.
According to experts, the lack of a standard process could hurt the company legally. “As per labour laws, a company has to have a standard severance terms and conditions. It is defined in the offer letter or in the service contract, and that cannot vary from employee to employee as per the whims of the management,” said Hansa Sharma, chief operating officer at Simpliance, a labour law compliance firm.
Infosys did not offer comment on the story.
According to Infosys’ filings with the US Securities and Exchange Commission, only CEO Vishal Sikka had a clause on severance in his contract. But since then, the company has handed out huge severance packages of over two years' salary to Bansal and more than a year’s pay to Kennedy. The payments have led to a storm at Infosys, with the company’s founders castigating the board for bad governance practices and saying that such large payouts could look like “hush money.”
Infosys has spent nearly a year trying to explain the out-size payments to Bansal. The company said it carried out an investigation at the behest of its audit committee to specifically look into whether the payout was made to silence Bansal.
In November, Sikka had also attempted to explain the payout to ET. “In retrospect, you can argue that it was larger than it should have been. It was a judgment that we made at the time, it was done over a two day period that was intense. The thing that I am comforted by is that the company has done nothing wrong. Nobody did anything wrong,” he had said.
According to Infy’s filings with the US SEC, only CEO Vishal Sikka has a clause on severance in his contract
Infosys working on a standard process for severance pay