IT cos may block pay hike, slash bonus due to coronavirus pandemic

India’s Information Technology (IT) service companies may halt salary hikes and slash bonuses to combat the impact of the coronavirus pandemic aka COVID-19, The Economic Times reported.

Meanwhile, bonus, increments and variable pay are “on hold,” CP Gurnani, CEO – Tech Mahindra told the paper.

Tata Consultancy Services (TCS) has already completed appraisals and “no discussions on pay freeze has been done”, but the final payout is undecided, an executive told ET. The company is still “dealing with the immediate fallout.”

Moneycontrol could not independently verify the report.

Bonuses are tied to firm performance and profits and, as such, will “automatically be reduced,” Peter Bendor-Samuel, CEO - Everest Group, told the paper. He added that employees were likely to “view the reductions as justified.”

Companies such as Wipro, HCL Tech and Infosys hand out hikes later in the year.

With the coronavirus pandemic affecting markets and businesses globally, analysts have revised FY21 growth for the IT sector. For example, Kotak Institutional Equities has recalibrated growth estimates of large and mid-cap tech companies downwards by 2-4 percent and the industry on the whole by 3-8 percent.

Companies, too, have revised estimates, Accenture cut guidance for FY20 in the 3-6 percent range from 6-8 percent earlier. Accenture's business is a key barometer on the impact on other Indian IT companies, the report pointed out.

As per a Nasscom executive, demand and bill rates have crashed as clients have moved to doing only ‘the most crucial work’, placed deals on standby and not signing new deals. Tech firm workers are also being asked to deliver work from home while trainees are being sent back to campus to maintain social distancing, the report said.