Kolkata: India’s biggest software services firm by revenues, Tata Consultancy Services Ltd (TCS), will not cut salaries of its 140,000 employees, chief executive and managing director S. Ramadorai said, but would review the variable pay component, which ranges between 20% and 35% of gross pay depending on seniority.
The move is part of its measures to trim costs and raise productivity as business suffers in the wake of a recession in the US and Europe.
TCS pays around 8% of gross revenues every year to staffers in the form of performance-linked variable pay, Ramadorai said. This amounted to around $450 million (Rs2,268 crore) for the fiscal year to March 2008.
Cost conscious: Ramadorai says his company’s revenues are under pressure because clients are renegotiating rates. PTI
Ramadorai said his company wasn’t planning to cut jobs immediately, but might have to “if the situation worsened.”
“That’s why we are reviewing variable pay...we hope that’s going to be enough,” he told the media here on Thursday. Currently, staff accounts for 53-54% of TCS’ costs, he said.
TCS is likely to cut variable pay from the current quarter to March, hinted Ramadorai. It typically makes such payments once a quarter, and the amount is determined based on the performances of the employee and the company.
Fraud-hit Satyam Computer Services Ltd has already said it wouldn’t pay the variable component in salaries of its senior employees, which for many is as high as 50% of gross pay.
Variable pay at Wipro Ltd, India’s third biggest provider of software services, ranges from 10% to 40%, according to its executive vice-president, human resources, Pratik Kumar. It’s linked to financial goals of both a team and the company. “Based on the goals achieved, we will pay full, partially or nothing,” he said.
Infosys Technologies Ltd, India’s second largest software exporter, said the issue of cutting variable pay does not arise. “Variable pay is linked to targets. There are clearly laid out targets for revenues and margins and the variable pay is linked to that,” said V. Balakrishnan, chief financial officer, “If it is not met, then the pay will be variable.”
Software firms had earlier cut variable pay in 2004 and 2001.
TCS, which has stopped hiring from January, might defer placing 24,500 students to whom it has offered jobs on campuses. These students might not be offered employment immediately after they finish their courses. What’s more, the salaries offered might also be revised. “Our aim is to maintain employee utilization at 77-79%,” Ramadorai said.
In its bid to rationalize costs and improve efficiency, TCS has also decided to increase work hours to 45 from 40 a week from 1 April.
Ramadorai said his company’s revenues are under pressure because clients are renegotiating rates. They are seeking 4-15% reduction in billing rates, he said.
“The biggest problem is closure of orders in the pipeline...there are delays, cancellations, and some (clients) are even filing for Chapter 11 (bankruptcy),” he said, adding that there was hardly any visibility on the business beyond the current quarter.
K. Raghu in Bangalore contributed to this story.