India's top IT services firms are freezing or cutting employee bonuses, worrying that tighter budgets for US and European clients who are gearing up for a slowdown could cut their own profits after a pandemic-led boom. will affect quickly.
Infosys Ltd., India's second-largest IT company, and smaller rival Wipro recently told their employees that they had paid employee compensation to employees at the two companies, according to related internal emails sent by management and seen by Reuters. The variable pay portion of Rs.
Some Indian companies include variable pay as part of the overall salary package of the employees and link it to the performance of the employee as well as the company.
"There is growing confidence in businesses that we need to prepare for the (global) recession," said Peter Bender-Samuel, chief executive of US-based consultancy Everest Group.
"The first thing they do is try to eliminate discretionary spending. It's early, but it's starting to happen."
Large Indian IT companies paid top dollar to lure skilled workers over the past two years as demand for services such as cloud-computing, digital payments infrastructure, cyber security and cryptocurrency transactions increased. It kicked off a struggle for talent with the company's report showing that the net number of people leaving large IT companies this year is 60%-80% higher than it was two years ago.
Factors putting pressure on margins include large pay packets.
Infosys' operating margin fell 3.6 percentage points to 20.1% in April-June and Wipro's IT services margin fell to 15% from 18.8% a year ago.
Last week Infosys told employees in an email seen by Reuters that the company was making a "structured effort" to improve performance, as it took variable pay cuts.
Wipro in mid-August stopped fixed payments at 70% of variable pay for mid- and senior-level employees and 70% of full variable pay for junior employees, blaming disappointing margins in the June quarter, sent to employees and seen by Reuters According to an email sent.
Indian IT companies have also cut hiring fresh graduates as they feel there is less need for people to leave, analysts said, adding that there will be further savings in operating costs.
Infosys declined to comment for this story. This directed Reuters to its latest earnings call, where CEO Salil Parekh said the company saw "slow decision-making" from customers.
Wipro recently launched quarterly promotions to try to retain employees.
The company said it has completed its first cycle of quarterly promotions effective July 1 and the pay hike for employees will be effective from September 1.
"We have no comment on the amount of variable pay," the company said in an emailed response to questions from Reuters.
A company spokesperson said that India's No. 1 IT services provider, Tata Consultancy Services, has not taken any cut in variable pay, which was given without any delay.
"We expect margins to continue to decline in the medium term ... this week," analysts at JPMorgan said in a note.
India's Nifty IT index has fallen a quarter this year, its first decline in six years and is up 1.5% from the benchmark Nifty 50 index.
Ruchi Mukhija, vice president of technology and internet, said, "The basic point would be that they are doing this (variable pay cut) to save or reduce pressure on margins, but at the same time it suggests that the growth outlook is soft. Happening." Elara Capital.
