What started off as a multi-year layoff in which HP paid severance of about one week for every year of service has turned into something else for some employees, particularly in HP's struggling Enterprise Services unit.
HP is lining up outside jobs for some of these workers that gets them off payroll but has them continuing to work on HP's projects or with HP's customers.
That's not a bad thing. Better another job than a pink slip, right?
But it's not 100% peachy for the workers, either, according to a person familiar with the matter. This person told us about one of the offers HP employees got.
A group of full-time workers, mostly hourly employees, were told in late July they were to become contract workers for contract agency Adecco August 15. If they accepted the job, they would lose all accrued vacation time and paid time off, all benefits, and all seniority. If they refused, they would be let go without severance.
The contract positions had some people taking big pay cuts; others got pay raises. Some people who were supervisors were stripped of their titles and others, some very junior, were offered supervisor positions.
Many of the workers in this unit refused the offer and quit, this person told us.
HP confirmed to us that it was trimming its workforce by obtaining alternative jobs for workers, saying it was doing this only for a "small number" of workers. A representative told us:
HP reached an agreement with a strategic labor partner to allow more flexibility in managing labor demands. There are a small number of employees who will move from HP and become contractors to HP’s Mobility and Workplace Services organization. HP will continue to own and manage the end-client relationship and overall service responsibility.
Second time this month we've heard about the tactic.
Earlier this month, HP also shifted an unknown number of workers from HP ES to contract IT consultant Ciber, the company confirmed to Business Insider. Same deal: Take the new job or be let go without severance, our sources said.
In 2012, HP said it planned to cut 25,000 people over the course of the next three years. That number has steadily ratcheted up. Last week, HP CFO Cathie Lesjak said HP would be cutting another 5% from its workforce, beyond the last target of 55,000.
Lesjak told Wall Street analysts that the additional cuts were not going to cost HP more money beyond the restructuring expense she had budgeted months earlier.
Now we have some idea of how HP is doing that.
$1 billion a year for seven years
HP has spent roughly $1 billion a year on layoffs and restructuring for the past seven years, ever since HP acquired EDS in 2008 and formed the HP ES unit. EDS nearly doubled HP's headcount, from 172,000 to more than 311,000.
Meanwhile, the unit has been shrinking in revenue for years, as outsourcing has gone out of favor while cloud computing is on the rise.
Throughout 2015, Whitman has told investors she is stabilizing the unit and is committed to it. She promised to bring margins up to 7% to 9%. She's doing that through restructuring the "labor pyramid" — i.e., hiring less-expensive workers and shifting more work to lower-cost offshore jobs, she said.
HP will split into two companies November 1 and HP ES will become part of the HP Enterprise company, with Whitman as CEO.
