HCLTech skips salary hikes for management level staff in FY24

Representative image

HCLTech is skipping compensation review entirely for salary hikes of senior management level employees for the fiscal year 2024, which forms a significant part of the company’s wage bill. This development comes as the country’s third largest IT services firm is facing a tough business environment and reported weak June quarter performance this week.

Speaking to analysts during the company’s earnings conference, CEO and MD, C Vijayakumar said, “This year, we have made a decision to skip the compensation review, starting with the management layer, which is E4+, and also defer for junior to mid-level people by a quarter, which is E3 and below levels."

According to CFO Prateek Aggarwal, the E4+ layer which includes the senior most staff, also forms a significant portion of the company’s wage bill.

Regarding junior to mid-level staff, Chief People Officer Ramachandran Sundararajan said, “Typically, this time of the year, we make our announcements on pay reviews. Last couple of years the hiring that we have done and the compensation reviews that we have done, we have taken that into consideration and have taken a decision to defer our annual reviews by a quarter.”

HCLTech reported big misses on several counts in Q1FY24, against analyst estimates. One of the key metric missed was the EBIT margin which fell to 16.9 percent in Q1, down from 18.2 percent in the previous quarter. Aggarwal added that nearly 36 bps of fall in the margins were driven by lower utilisation rates in Q1.

The company also reported a decline of 2,506 employees in its total headcount in Q1, while choosing not to back fill attrition.

Improving utilisation rates will be a key component to ensure improvement in operating margins which will eventually help the company achieve its guidance of exiting FY24 with an 18-19 percent margin, Vijayakumar told Moneycontrol during an interview.

Not just HCLTech, peers Infosys and Wipro too are delaying pay hikes. As of now Wipro is holding up its wage hike cycle until the third quarter or the December quarter, unlike last fiscal when hikes were rolled out in the September quarter.

Wipro will also be paying out only 80 percent of the variable pay to its junior level employees in Q1, which is linked to the company’s overall performance.

Infosys too has deferred pay hikes, which is generally rolled out to employee levels below the senior management in April and to the senior management in July. Employees of both of these segments didn't received any communication from the company on these delays.

Tata Consultancy Services (TCS) turned out be an outlier this time as it has already kick started its promotion cycle, having offered 12-15 percent hikes to its exceptional performers effective from April 1. TCS, however, has deferred onboarding of over 200 lateral hires with two to 15 years of experience until October citing uncertainty and delays in project commencement.