Home/ Companies / News/  TCS alters pay hike policy for lateral hires as costs bite

Tata Consultancy Services Ltd (TCS) has changed its salary increment policy for lateral hires underscoring efforts by India’s booming technology sector to arrest high staff costs.

India’s top software services exporter has ended the practice of giving a marginal hike to lateral hires after they complete a year in service, said two people aware of the development. Such employees would henceforth receive pay hikes during the regular appraisal cycle, they said.

“Employees are coming in at high salaries, then they get another hike after completing one year and then another one in the regular appraisal cycle. Now onwards, experienced professionals (EPs) will get hikes in annual appraisals and nothing in between," said a senior industry executive aware of the development.

Another industry executive added that multiple pay hikes was affecting operating costs in a company like TCS, which has more than 600,000 employees and expects to add an additional 40,000 this financial year.

“We have always had increments in line with industry benchmarks. Even during the pandemic, we ensured our increment cycles were unaffected. It is incorrect to suggest otherwise. All experienced hires will be given an increase as part of the annual salary appraisal that follows their one-year anniversary," a spokesperson for TCS said in response to an emailed query.

The comments follow an email sent to the new lateral hires at TCS notifying them of the changes.

The letter said, “There has been a recent revision in TCS policy around the first anniversary". It further said that those who have completed their first year with the company on 1 April or thereafter will not receive a letter and/or increment on completion of one year.

“The first increment will be at the subsequent annual increment cycle," according to the letter, seen by Mint.

The changes in policy come at a time when India’s tech sector is gearing up for budget constraints amid a looming recession in the US.

Staff wages make up 60-70% of total expenses at tech firms. This is followed by infrastructure costs and travel spending.

This year, tech companies have rolled out hikes and promotions in a bid to retain staff amid a covid-induced boom in the sector. However, variable pay, which is directly linked to business per quarter, was impacted.

While some such as Infosys are rolling out 70% of variable pay, Wipro had delayed payouts for certain employee categories. TCS had earlier said that it has not delayed variable payouts. However, the changes in wage policies may further dent the hiring frenzy where candidates moved jobs at 60-70% pay hikes as businesses across sectors adopted digitization.

“At the time of recruitment the company promises to pay definite salary to employees but later amend policies without even talking to employees which is no less than cheating," said Nascent Information Technology Employees Senate (NITES), a Pune-based labour union.

Devina Sengupta
Devina Sengupta reports on the shifts in India Inc’s workplaces, HR policies and writes about the developments at India’s biggest conglomerates. Her stories over the last decade have been picked up and followed by Indian and international news outlets. She joined Mint in 2022 and previously worked with The Economic Times and DNA-Money.
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Updated: 03 Sep 2022, 05:38 AM IST
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