Exclusive: Mu Sigma revises pay offer for new hires, sets Rs 15 lakh penalty for employment bond breach

Exclusive: Mu Sigma revises pay offer for new hires, sets Rs 15 lakh penalty for employment bond breach
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7 Jul, 2020

Big data analytics company Mu Sigma has revised the pay structure of its summer placement offers. The incoming batch of employees will have to pay a heavy financial penalty for breach of contract.

Tweaking its earlier offer, the Bengaluru and Illinois-based company has set a penalty of Rs 15 lakhs if the employee quits before the stipulated period, according to multiple people with knowledge of the development.

The incoming batch of new hires, about 750 of them, were informed of the modification in the pay structure during a webinar hosted by Mu Sigma leadership on June 26.

According to the new contract, reviewed by TechCircle, employees are offered a Rs 40 lakh package. The four-year contract is split into Rs 10 lakh for training, Rs 5 lakh of variable pay and Rs 25 lakh in fixed salary.  

An emailed query sent to Mu Sigma did not elicit any response at the time of publishing this article.

About Rs 10 lakh is allocated to a pre-employment training at Mu Sigma University (MSU). This is a cost incurred by Mu Sigma for the four-month training period and will not be paid in cash to employees. 

MSU is a learning and career development programme designed to train employees on subjects such as data-driven behavioural analytics, financial analytics, big data analytics software, and business decisions.

According to one of the sources TechCircle spoke to, the company will conduct internal tests at the end of the course and the bottom 20% (based on the test results) will be asked to leave and will not receive any severance.

The remaining Rs 30 lakh of the package includes a total of Rs 5 lakhs of performance-linked bonus spread over the course of the contract, starting from Rs 50,000 in the first year (July 2021), Rs one lakh in the second year, Rs 1.5 lakh in the third and Rs 2 lakh in the final year (July 2024).

Top 20% performers will be eligible for 200% of the bonus pay-out, middle 30% will receive 100% of bonus and remaining 50% will get 60% of the variable pay.

The remaining sum of the package constitutes the compensation part. The new recruits will join the company on a fixed pay slab of Rs 3 lakh per annum which will jump to Rs 5 lakh in the second year, Rs 7 lakh in the third and Rs 10 lakh in the final year of the contract.

In the event an employee decides to leave the company before completion of the 4-year period, he or she will be required to pay a penalty in addition to a 30-day notice period. The penalty would be a multiple of the training cost (Rs 10 lakh), depending on the tenure of the employment. Anyone leaving within 18 months will have to pay Rs 15 lakh of penalty (which 1.5 x training cost). Employees leaving in the 19-36 months period will have to pay Rs 10 lakh (1 x training cost) and those leaving in the 37-48 months’ timeline will pay Rs 7.5 lakhs (0.75 x training cost).

“I know that there is a high attrition problem at Mu Sigma. So if I think from the perspective of the company’s leadership team, it's justified for them. But from a student’s point of view, it's really tough on us. Mu Sigma claims to be a leader in the problem-solving domain, but this doesn't look like a solved problem. The offer is just too one-sided. This is just not acceptable from any organisation that hires humans,” one of selected students said.

This is different from what the original contract stated when the students were recruitment from the campus. Employees were offered Rs 21 lakh package over a three year period. This included a one-time joining bonus of Rs 5 lakhs (taxable) to the selected candidates after the completion of six-month training. This amount needs to be paid back in full in the event of a contract breach (3 year bond) along with a six-month notice period. The compensation structure was Rs 3.3 lakh per annum in the first year, Rs 5.45 lakh in the second year and Rs 7.25 lakh in the third year.

The recruitment process began around August-September period last year when the students were in their seventh semester. Mu Sigma offered them a provisional offer letter after in-person interviews conducted on their campuses. They were selected after an online exam a week before the interview. Around March 2020, the company rolled out offer letters with the exact date of joining. Joining dates varied from June 2020 to Sept 2020.

In the wake of Covid-19 induced lockdown, the company informed the students about the revocation of joining dates in late April. However, there weren’t any indications of contract modifications. Changes in the contract were disclosed during a webinar.

“If the company lets you go, they force you to resign so as to not pay a severance amount. In case someone decides to resign before completing the 3 years, they need to pay back the 5 Lakh (full amount) before the last day in company. Even the previous contract was ridiculous, but the latest contract is more ridiculous based on details I have received,” a former employee told TechCircle.