Novartis employees brace for new wave of job cuts

Novartis made a net income of $7.7 billion in 2017, according to its annual report. It has 126,000 employees worldwide; 13,000 of them are in Switzerland. Keystone

Employees at pharmaceutical company Novartis are bracing for a fresh wave of significant job cuts, according to swissinfo.ch’s sources at the company, a union representative and local media. The move is part of a wider restructuring campaign that could see more senior positions moved out of Switzerland.

“We fear that Novartis will announce job cuts [at an employee information session] because they want to push up their benefit margins from 30-35%,” trade union UNIA’s Christian Gusset told swissinfo.ch this week. He pointed to recent remarks by Novartis President Jörg Reinhardt on restructuring plans. 

A Novartis spokesman declined to comment on what he described as rumours, stressing that the company constantly scrutinises its operations for “efficiency and effectiveness” and “is generally committed to communicate early and transparently on any potential workforce changes with its associated and partners”.

Reinhardt told Swiss newspaper NZZ am SonntagExternal link earlier this month that the Basel-based company wanted to increase profit margins by streamlining its production sites and administration worldwide. The company has its HQ in Basel as well a plant in Stein, Aargau, in northern Switzerland.

It remains to be seen just how many Swiss jobs would be affected, but a report in the local newspaper Basler ZeitungExternal link on Thursday estimated up to 800 jobs could be on the line between Basel headquarters and the Stein AG production site. An internal announcement had been expected on Wednesday but was delayed.

HQ and IT cuts

A headquarters employee told swissinfo.ch that there was pressure on several divisions to cut staff by about 20% – another source put that figure higher – with a first wave of cuts in the IT department announced internally in August and affecting 85 people. Bonus and incentive packages have also been pared down.

The HQ employee and the union representative also pointed to a tendency to move senior positions out of Switzerland.

“Everyone is aware that Switzerland is deemed too expensive and therefore everything that is done here could be sent away,” said the Novartis employee, who requested anonymity. 

“We have already communicated that there will be a reduction in the standard areas in parallel with the establishment of new production facilities,” Reihardt said. “This will affect various plants around the world and also have an impact on Switzerland.”

In the past, Novartis has shifted IT jobs, for example, to Poland and India.

Senior positions shifting out of Switzerland

The employee pointed by way of example to an internal company memo announcing that the Global Head of Communications will be relocating from Basel to Hyderabad in line with the Novartis Business Services strategy to turn “global service centres” into “operational management centres”. 

“What traditionally happened was that we outsourced or offshored the lower management roles leaving someone in Basel to manage remotely,” he said. “Now they are moving senior management as well.”

The drug-maker in 2017 consolidated its oldest and largest global service operations in the Indian city of Hyderabad, setting up 3,500 employees in a new office. Similar centres, which traditionally support the parent company on services ranging from financial reporting to medical communications and data management, also exist in Kuala Lumpur, Prague, Dublin and Mexico.

Anchored in a huge campus on the banks of the Rhein River in Basel, Novartis had kept the top brass of discovery, sales, marketing and communications in Switzerland because even though it is a global operation there is still a need to meet face-to-face, the employee added.

This trend, which started with the delocalisation of production jobs, is now sweeping up employees across specialties, confirms Gusset, who covers the pharma industry for Switzerland’s largest union. The phenomenon is not limited to one company or the pharmaceutical sector.

A quest for higher profit margins

“It’s not just Novartis,” Gusset said. “What we see now, and this is really the case that for employees in HR (human resources), administration and finance –  management included – are being delocalized and centralized in countries like Poland or India.”

He said UNIA is already in touch with Novartis employees who expect to be let go in the next round of Novartis job cuts in Basel. Such moves, he said, strike him as illogical as the company with a global workforce of nearly 126,000 peoples has a high net profit per person (about $61,100, CHF 58,500 per person).

Novartis has been in consultations with the in-house social partner, NAV.External link

The Chairman of the Staff Committee of Novartis, Davide Lauditi, declined to comment, saying he had “not been officially informed” of new cuts. Claudio Campestrin, president of the board of NAV, said these talks were focused on restructuring already announced in 2017.

That year, the Swiss pharmaceutical said it would be cutting 500 jobs at its Basel headquarters over a period of 18 months. This would be offset by the creation of 350 new posts, mostly in the biotech business. “I have no information about any job restructuring to be announced,” Campestrin told swissinfo.ch on Tuesday.

A company ‘committed’ to Switzerland

In August, Novartis said it would be investing CHF90 million ($91.5 million) over three years on a production site for cell and gene therapies at the company’s Stein site in Aargau. That move would create 260 jobs and that number could rise to 450 by 2021. The goal is to enable new treatments to be delivered in Europe.

A Novartis spokesman declined to comment on the job cut “rumours” and denied there was any “centrally declared target” that would lead to a reduction of staff in Switzerland.

He also described an increase in managerial roles at the Novartis Business Services Organization (NBS) as the logical next step of having established global service centers in Dublin, Hyderabad, Kuala Lumpur, Mexico City and Prague to deliver “high-quality services at lower costs”.

“Novartis is deeply committed to Switzerland and to its Swiss roots,” said Markus Jaggi, Head of Communications Switzerland and Strategy Development at Novartis, noting that in addition to having global headquarters in Basel, Novartis invests more than $3 billion each year in research and development.

“We have a workforce in this country that is far bigger than the share of the Swiss market in our portfolio would suggest – fewer than 2% of our global sales, roughly 10% of our global workforce, mostly in headquarter functions,” he told swissinfo.ch. “There is no intention to change that.”

Fewer pillmakers?

The Basler Zeitung in its Thursday report said the focus of the next wave of job cuts would also hit the Stein AG production site. The Aargauer Fricktal region is home to the world’s largest plant of the pharmaceutical division of Novartis.

The newspaper said employees fear that the Schweizerhalle plant in Basel will be dismantled. There, around 560 employees produce active ingredients and intermediates for around 25 medicines.

Stein plant employees fear that there will be cuts in among the workers who manufacture medicines in tablet or capsule form. According to internal company sources cited by the newspaper, around half of the 1,670 employees in Stein work in this area. In the worst case around 800 of those jobs could disappear.

However, it is questionable whether Novartis will make such a harsh cut, as the company has invested heavily in Stein in recent years, the newspaper noted.