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Tata Consultancy Services (TCS) has taken a step by implementing a salary hike for its employees, despite the impact it will have on the company's operating margin. TCS CFO Samir Seksaria revealed that the annual salary increase, effective from April 1, would result in a 200-basis-point hit on the operating margin, which currently stands at 23.2%. Nevertheless, India's largest software services exporter is confident that improved efficiencies will help offset this impact.
TCS, In addition to the salary hike, has also initiated the promotions cycle and rewarded exceptional performers with a raise ranging from 12% to 15% during the latest annual compensation review. The company is pleased to note that its attrition level continues to trend downwards and expects to return to its industry-leading, long-term range in the second half of the year.
During the June quarter, TCS reported a further decrease in attrition for its IT services, which stood at 17.8% over the past 12 months. The company's workforce has grown to 615,318 employees as of June 30, with a diverse composition of 154 nationalities and women comprising 35.8% of the base.
TCS says that it remains committed to honouring all the offers made and plans to leverage the capacity built in the previous year. This commitment to salary hikes comes in contrast to reports that Infosys has deferred such hikes for the June quarter. The challenging global macro environment has impacted demand for Indian tech companies, necessitating strategic responses.
While TCS experienced significant revenue, expanding its order book to $10.2 billion during the June quarter, concerns about near-term demand persist due to global economic uncertainties.
TCS CEO K Krithivasan acknowledged that some non-business-critical projects were being paused, deferred, or re-prioritised by clients due to uncertainty and a focus on return on investment. This trend aligns with the reduction in discretionary spending by clients and deferred annual pay hikes observed by HCLTech, a smaller rival of TCS.
TCS reported a consolidated revenue increase of 12.6% to ₹59,381 crore in the first quarter, along with a 16.8% rise in profit to ₹11,074 crore. While there were no significant project cancellations or rampdowns, the recovery in demand remains uncertain as clients grapple with short-term uncertainties.
(With agency inputs)
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