IT firm Infosys has decided to cut the average variable payout of employees to 70 per cent due to the pressure on the operating margin in the first quarter of 2021-2023. The company sends an email to its employees notifying the same.
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In the internal mail, it is stated that, "We are fuelling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While these investments have impacted margins in the immediate term, we are making structured efforts to improve our performance in quarters to come."
It also added that the final payout will depend on individual department or unit guidelines and the performance bonus payment for delivery (DEL) and business enabling functions (BEFs) for the first quarter is scheduled in the August 2022 payroll.
Harpreet Singh Saluja, president of labour union Nascent Information Technology Employees Senate (NITES), in a news report was quoted as saying, "The company usually pays 100 per cent and now it has said the payout is 70 per cent ad has deducted 30 per cent of variable pay, which is clear exploitation of IT employees. NITES strongly condemns the unethical deductions being implemented by Infosys. Under the pretext of an uncertain economic environment, the company has withheld variable pay component of the employee."
As per reports, Infosys reported its operating margin of Q1 FY23 at 20.1 per cent, that shown a decline from 21 to 23 per cent. The higher retention costs and cross-currency headwinds has impacted in rising overall expenses to 29 per cent. During the last quarter, Infosys had reported the attrition levels at 28.4 per cent and had increased its employee headcount to 21,000.
Infosys is not the first IT firm to reduce variable pay. Before that, IT companies like Tata Consultancy Services and Wipro had also cut the variable payout for the April-June quarter after the operational margins came under pressure.
Nilanjan Roy, chief financial officer of Infosys, during the company's Q1 FY23 earnings call, in a news report was quoted as saying, "We did two wage hikes in the calendar year 2021. This year, we rolled out another in April. Within a year and a half, we have done three substantial hikes and in September last year, we also did a skill-based increase. To capitalize on this demand, we have to pay for premium skills. We do not want to leave a five-year demand on the table because of short-term cost pressures. We can optimize these over this year and the future as well."