IT cos pare variable pay to maintain margins

Written by Rachana Khanzode | Mumbai, Sep 18 | Updated: Sep 19 2008, 08:03am hrs
IT companies have cut down variable pay components of their employees drastically in a fresh bid to cut costs. This comes close on the heels of their decision to employ more freshers than experienced people in the forthcoming quarters; steps insiders say have become necessary as companies are under pressure to cut costs in order to keep their margins up.

Variable pay constitutes a part of the salary package and is subjective to the company and employees performance. Various employees say that their companies have paid them as low as 5-10% of the committed amount.

An IBM employee said that the company paid just 5-8% of the committed variable pay even to the best performers. However, an IBM spokesperson said, IBM continues to offer competitive compensation to its employees.

Much on the lines of the IBM employee, an employee of Cognizant Technology Solutions (CTS) said, Earlier, variable payments were given twice a year, but now, we will get it just once a year. It skipped the last six months variable pay for all employees. Bhaskar Das, VP-HR, Cognizant said, Traditionally, Cognizant has given incentives only once a year. The average incentive that we paid earlier this year was, once again, well above the target incentive payout.

Sources say that the story is the same across other large Indian IT companies. For instance, earlier this year, Tata Consultancy Services (TCS) reportedly informed its employees about a cut in variable pay since it fell short of meeting the target economic value added in the third quarter. However, Ritu Anand, VP-HR, TCS said, Last quarter, we had met our internal targets and all TCS employees received the quarterly component of the variable pay in full.

Employees find themselves in a fix as companies have excused themselves by saying that market conditions are not good; their performance has suffered and variable pay will be in tune to it.

On the other hand, employees are finding it difficult to switch jobs as IT firms are increasingly looking at adding freshers.