Wipro introduces new incentive structure for staff
3 min read . Updated: 03 Jun 2013, 11:25 PM IST
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Junior programmers to be rewarded on billable hours, senior managers on client satisfaction
Bangalore: India’s third largest software exporter Wipro Ltd plans to give high single-digit pay hikes on average across the company and has put in place a new incentive structure that will reward junior programmers based on billable hours and senior managers based on client satisfaction.
Junior-level programmers form more than 70% of the workforce.
Employees and teams filing patents for software that are eventually granted could get incentives worth $500-2,000.
Managers will be judged on three parameters—top-line growth, bottom-line growth and employee satisfaction—but customer satisfaction will be the main one used to decide on bonuses and incentives.
“Our principle behind this is if our customers are successful, then we are successful," said Saurabh Govil, senior vice-president of Wipro’s human resources division. “So everybody’s account is their universe, the account becomes the nucleus. If the account is doing well, then people will get rewarded accordingly… If we don’t reach a minimum threshold of customer satisfaction, nobody gets paid."
The new compensation structure will reward engineers based on the performance of a particular client account, and not that of a particular business vertical.
For example, if a certain number of engineers successfully manage projects for a client such as Citigroup or Bank of America, the entire team working on the account will be rewarded, irrespective of their business divisions.
“Earlier, everyone used to be managed by whichever business unit they were working for... Today, every account is treated as an individual organization and they’re managed by this," said Govil. “Earlier, it was not so well laid out because we were growing so fast and we could afford to accommodate more people. Here it’s becoming much more focused."
Wipro is aiming to make employees more accountable for the overall performance of the company and at the same time manage costs more effectively by keeping a tighter watch on revenue productivity, which is the ratio between salary costs and overall revenue.
Such an incentive structure will not include programmers who form the “bench" of a company and hence, do not get billed for projects. Previously, they also used to be eligible for incentives based on the company’s performance.
For a junior-level code-writer to be eligible for incentives, each will have to be billed for at least 50% of the time per quarter on a billable client project.
The incentive portion of overall compensation ranges from 10% to 35%, depending on seniority, with the variable component being bigger for those higher in rank. The rest is “fixed" or base pay.
For years, Indian software firms have been hiring thousands of engineering graduates and building large campuses for training and housing them. The so-called “pyramid model" that sees the entry of a large number of fresh engineering graduates every year brings down the cost of software development and maintenance projects.
That model of deploying 30,000-40,000 staff for earning every $1 billion in revenue is changing rapidly.
For example, in 2003, when India’s software exports were worth just $9.5 billion, software service providers such as Tata Consultancy Services Ltd (TCS) and Infosys Ltd needed 37,798 engineers to earn $1 billion. In the year ended March 2011-12, the industry added 19,783 people for every additional $1 billion in revenue, according to industry lobby Nasscom.
Top clients, such as Citigroup and Target Corp., are increasingly shifting to newer pay-per-use billing models to avoid high upfront investments in buying and deploying software products from Oracle Corp. and SAP AG.
In April, after announcing quarterly results, Wipro gave a tepid forecast for revenue growth for the current quarter, raising concerns over whether the turnaround plan overseen by chief executive officer T.K. Kurien was working. Over the past three-four years, Wipro has been struggling to boost revenue growth and win market share from rivals such as TCS, Cognizant Technology Solutions Corp. and HCL Technologies.
According to recruiting firms and human resources experts, average pay raises in top companies in the sector such as TCS and Infosys have been at 5-8%, with Cognizant giving a slightly higher hike due to its stronger performance during the year.
“Compared to last year, the variable portion of overall salary has dropped (this year)," said Vishalli Dongrie, senior director at Deloitte Touche Tohmatsu India Pvt. Ltd. “Companies are not doing as great as they used to previously."
In April, when Infosys announced its quarterly results, the company had said it would change its compensation structure to allow for an increase in the fixed component of the salary and reduce the portion of variable pay. Industry experts said Infosys has reduced the variable portion of the compensation on an average from 15% to around 7%.
“The overall compensation change (in the IT sector) is directed more now towards your personal performance and personal goals," said Anshuman Das, co-founder and chief operating officer of CareerNet Consulting, a company that recruits engineers for top IT firms.
