It’s not only Tata Consultancy Services, but other top IT services firms have also cut the variable pay of senior employees due after the September quarter as the sector continues to face headwinds on account of muted client budgets, industry sources said.
However, at junior to mid-levels, most employees have got up to 100% variable pay depending on office attendance and performance, sources added.
“Seniors who are in people manager roles (those overseeing or managing projects but do not have billable hours on their profile) are seeing 20%-30% reduction in the variable pay,” Gaurav Vasu, founder and chief executive officer, cognitive intelligence platform Unearthinsight said.
He added that this is a result of a soft business performance in Q2 in addition to a weak outlook for Q3 given the quarter will see furloughs and fewer working days for most IT clients.
For some employees team managers and team leads at IT firms, this is the second consecutive quarter where variable pay has not been given, company employees FE spoke to said.
IT firms, inlcuding TechM, Infosys, Wipro, HCLTech, and LTIMindtree did not respond to queries on the subject till the time of going to the press.
“For senior roles, the variable component is now tied to the performance of specific business units rather than being a company-wide percentage,” Krishna Vij, vice-president, TeamLease Digital said adding that junior employees typically received their full variable pay.
Late last week, it was reported that senior employees at TCS got 20%-40% of the variable pay for the July-September quarter, while those at junior grades got 100%. The company also said that for all grades above the junior grade, the quarterly variable pay or allowance depends on the unit’s business performance.
One of the reasons that junior employees are getting up to 100% variable pay could be an effort to discourage attrition. Utilisation levels are in the mid- to high-80s (as of Q2), and further attrition could lead to elevated cost of acquisition of new employees which will add to margin pressure analysts added.
The IT sector continues to face challenges and pressure on margins. The top four Indian IT services firms —TCS, Infosys, Wipro, and HCLTech — saw year-on-year decline in their total contract value (TCV) during the July-September period, due to the absence of mega deals and continued lumpiness in large deals. This resulted in muted single digit growth as well.
Additionally, while the companies have shown some optimism for recovery in the October-March period, Q3 is likely to remain muted on account of furloughs and fewer working days in North America and Europe.
“The furlough season has also contributed to these delays, affecting margins and prompting companies to take a more cautious approach,” Vij added.