India’s biggest IT services firm Tata Consultancy Services (TCS) has delayed the variable pay for senior employees for the first quarter of FY23 , a few days after rival Wipro made a similar decision as the sector braces for a slowdown.
The variable pay has been delayed for certain grades— C3A, C3B, C4 and equivalent— of employees for the June quarter.
“This will be paid along with August 2022 payroll to eligible associates,” an email, reviewed by by Moneycontrol, read. Moneycontrol has learnt that the variable pay has been paid with July’s salary to junior employees.
In a statement, TCS said its compensation and bonus cycles were as per plan.
For the quarter ending June 30, 2022, TCS had a headcount of 6,06,331 and added 14,136 associates.
TCS’s operating margin in Q1 was 23.1 percent, down from 25.5 percent from the year-ago quarter, which it attributed primarily to salary increases that were rolled out from April 1.
“The other is the continuing demand environment and the attrition environment that is leading to the increased operating costs on the employee side,” TCS CEO Rajesh Gopinathan had said in an earnings call. Attrition would probably take a few more months to come down, he said.
“Till then the margin pressures will continue but we hope to sequentially improve from where we are, given that we have taken a hit on that completely,” he said.
Variable pay, part of an employee’s cost to company, is linked to either the employee’s performance or that of the firm. While variable pay ranges between 10-15 percent for junior employees, it can be up to 20-30 percent of the compensation for mid to senior level employees.
Earlier this week, Moneycontrol reported that Wipro was holding back variable payouts to mid and senior-level employees for the April-June quarter. Junior-level employees, too, would only receive 70 percent of their variable pay for the quarter.
Wipro’s note to its employees blamed the move on the pressure on operating margins, which, in turn, was attributed to "inefficiency in our talent supply chain, project margins, and our investments in talent, technology, and solutions during the quarter, which will continue as these are directed toward long-term value building."
Wipro, whose operating margin came in at 15 percent, told employees that the company was measured on three financial metrics for variable pay—revenue, order booking, and margins, and was not paying out the variable pay due to the hit it took on margins.
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