BANGALORE: Infosys has surprised its employees, and many industry analysts, by giving a 10% salary increase, ending speculation about whether the company would give increments given its sluggish financial performance.
The second-largest IT company has handed increment letters to its sales teams and to those employees who have received promotions. The salary hikes will be extended to other departments in phases, said sources familiar with the development.
In response to TOI's questions on the increment and reducing the variable component of the salary, Infosys provided the following statement: "Our employees have given consistent feedback about reducing the variability in their compensation. In response to this feedback, we have enhanced the guaranteed part of their compensation, reduced the variability and simplified the overall compensation structure. We continue to look at ways to bring in other changes to positively impact our employees compensation. We are communicating these to our employees as we roll them out."
Given that the salary hikes are higher than the company's revenue growth of sub 6% in the last fiscal, the company's profitability may be hit in the next few quarters, analysts said. Infosys is growing significantly lower than its peers like TCS and Cognizant.
Last year, salary increases were given in October , when the company came under pressure from peers in the industry. Infosys then gave a 6% hike to offshore employees and 3% to onsite employees. In a recent stock exchange filing, the company said wage hikes were inevitable due to competitive pressures. The company said it has to increase its employee compensation more rapidly than in the past to remain competitive with other employers, or seek to recruit in other low labour cost regions to keep wage costs low.
"These wage pressures have led to a situation where wages in India are increasing at a faster rate than in the United States, which could result in increased costs for companies seeking to employ technology professionals in India, particularly project managers and other mid-level professionals," the filing said.
The company said in April that it was working on a new salary structure with a higher proportion of fixed components to reduce uncertainties for employees. Kris Lakshmikanth, CEO of recruitment firm Headhunters India, noted that the variable payout was as high as 50% of the total compensation at the senior level. "The company's lackluster performance washed out a large portion of the variable pay for employees," he said. At the mid-to-junior levels, variable components constitute about 20% of their compensation.
Sources said that at the lower levels, variable pay might be eliminated. The move towards less variability is contrary to recent trends in industry and is likely to be welcomed by most employees. "It could be a strategy to retain people," said one of these sources.
More of guaranteed part of salary Less of variable component At lower levels, there may not be variable pay.
The Inevitable hike
Infosys had recently said wage hikes were inevitable due to competitive pressures. Employee compensation had to be increased more rapidly than in the past to remain competitive with other employers, or to recruit in other low-labour cost regions to keep wage costs low.
source : timesofindia