Pay Hike In India Indian IT Firms: It’s All About Cutting Bonuses And Freezing Hikes This Year

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The pay hike in Indian IT firms is most likely to disappoint employees very much this year.

The Indian Information Technology firms are being hit hard amid the Coronavirus outbreak causing absolute wreckage of the global economy.

To combat the business slowdown caused by the immediate shutdowns that have been brought upon us by the Covid-19, the Indian IT services firms are reportedly thinking of opting the route of freezing pay hikes and cutting bonuses. Senior executives and analysts who have taken note of this move have reportedly remarked that it replicates that of the ones made during the financial crisis in the United States in the year 2008.

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Speaking about the Covid-19 disrupting business, C P Gurnani, who is the Chief Executive Officer of Tech Mahindra has told ET that the company has put on hold all kinds of increments in pay structures including bonuses and variable pay.

He also added that it is time to first prioritise the safety of people amid this outbreak.

Employees of the Indian IT services firms who are capable of delivering their work and take care of responsibilities remotely have been asked to work from home whilst trainees have been reportedly sent back from the campuses. The Indian IT services companies are taking these measures to comply with the recommended norms of social distancing and helping contain the virus at a faster pace.

Pay Hike In Indian IT Firms: Not On Cards

Last Thursday, citing the uncertainty due to the Covid-19 outbreak, Accenture has reportedly cut its guidance for FY20 (September-August). Previously, the IT giant estimated 6% – 8% growth but now the company has revised its range between 3%-6% only.

Such revisits effectively indicate that business will undoubtedly go through a huge slump in the next two consecutive quarters as the company’s revenue grew by only 8% YoY in the first six months. This definitely is alarming because the business of Accenture is often considered a key metric when it comes to predicting the impact on all other significant Indian IT companies.

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The executives of TCS or the Tata Consultancy Services, don’t think differently either. A senior executive of the company reportedly revealed that TCS is yet to decide on their payouts even though it has already completed their annual appraisals for the year.

The TCS executive further added that they are still trying to cope with the sudden fallout and business slowdown and are yet to discuss pay freezes. The company is yet to respond to the queries of news outlets on this.

No information has been received about the steps that are being undertaken by companies such as Wipro, HCL Tech and Infosys as pay hikes are mostly handed out later in the year by them.

“The crisis will likely negatively affect profits and to the extent that bonuses are tied to firm performance and profitability, they will automatically be reduced. In this case, employees are likely to view the reductions as justified,” said Peter Bendor-Samuel, CEO, Everest Group.

He also added that companies are more likely to face problems related to morale and turnover if they use compensation adjustments as a way to keep their profits stable and high.

The Covid-19 Outbreak Is Breaking Firms Apart

It is no surprise that Indian IT services companies are being affected so very drastically as they are no different than all other businesses globally which are now witnessing a huge slump due to the Covid-19. The deadly outbreak surely has jumpstarted the downward spiralling of the entire economy and plunged it straight into the throes of a recession.

As per the revelations by a Nasscom executive, a significant crash in the billing rates and demand is being observed by all the Indian IT companies as their clients are focusing only on the most crucial aspect of their business to keep it afloat. Therefore, all the deals which with previously confirmed upon are now being put on standby while new ones are just not being signed.

Also, after noticing the fallout of key markets in the US and Europe due to the outbreak, several analysts have now revised their predictions of the growth of the Indian IT sector in FY21. A 2-4% revenue growth of some large and mid-cap tech services companies has been brutally cut by the Kotak Institutional Equities along with 3-8% of the industry as a whole.

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