TCS assures 70% employees will receive full variable pay

• TCS HR head said that 70% of its employees will receive 100% of their variable pay.
  
• The company said that it has given a 12-15% raise for exceptional performers in its latest annual compensation review.
  
• TCS admitted that there have been delays in onboarding freshers, but promised to honour all their offers.
  

There has been a shadow of gloom on the Indian IT sector and many sector watchers were expecting this to translate on the salaries of techies soon. However, the country’s largest IT company TCS seems to have ridden past this. The company’s HR head Milind Lakkad has said that 70% of employees will receive their full variable pay.

“The rest of 30% will get it based on business performance,” Lakkad said in a press conference while declaring its Q1 earnings.

Unlike fixed pay, variable pay differs as per company policy, employee performance and many other factors.

Lakkad also said in the press release that the company has given a 12-15% raise for exceptional performers in our latest annual compensation review, and also commenced the promotions cycle.

“We remain focused on developing, retaining and rewarding the best talent in the industry, and enhancing their effectiveness by bringing them back to office to foster our culture. Our Return to Office initiative is picking pace, with 55% of the workforce already in office thrice a week,” Lakkad added.

A margin hit

Sector analysts said that revenues and margins will be soft for the quarter, especially for those companies which do not cut variable pay for their employees. TCS’ operating margin stood at 23.2% which was flat on a year on year basis, growing by 0.1%.

“We have gone ahead and rolled out our annual salary increase with effect from April 1st . Our operating margin of 23.2% reflects the 200-bps impact of this hike, offset through improved efficiencies,” Samir Seksaria, CFO of TCS.

Most companies across the world are getting tight fisted with their IT budgets and that’s been affecting Indian tech companies’ deals wins. The company reported a 7% year-on-year revenue growth in constant currency terms for the first quarter, in line with analyst expectations.

TCS CEO K Krithivasan too admitted in the Q1 earnings conference that the demand for IT services are expected to remain soft in the near term. This is also bad news for employees of these organisations.

‘Will honour commitments’

TCS also has been bringing fewer and fewer people onboard in the last few quarters. This quarter, its net headcount addition was at 523, similar to the number added last quarter.

Added to that, there have been delays when it comes to onboarding freshers who have received job offers from them.

“There have been delays because of the environment that we are in. There are project delays and this is a result of that. I will commit today that we will honour all our offers,” said Lakkad, adding that they will also continue to onboard freshers without putting a number on it.

On the bright side, the company like all its peers has been battling high attrition rates for most of FY23, and that’s seeming to let off. The number of people quitting has reduced even on a quarter on quarter basis as its April-June attrition stood at 17.8%, as compared to 21.1% in the fourth quarter of last year.