According to sources, Infosys, India’s second-largest IT services company, has reduced the average variable compensation of employees to around 70% for the June quarter due to margin pressure and rising labor expenditures.
Wipro recently delayed variable pay for employees due to margin pressure, inefficiency in its personnel supply chain, and investment in technology. Tata Consultancy Services a larger rival, has reportedly delayed quarterly variable compensation payouts for some employees by a month.
According to reports, Infosys has lowered variable pay for the June quarter, or Q1FY23, to around 70%, and staff has been told.
Infosys reported a lower-than-expected 3.2 percent increase in June’s quarterly net profit due to rising costs last month. However, citing solid demand and a robust deal pipeline, the company boosted its full-year revenue growth forecast to 14-16%.
The company maintained its margin forecast of 21-23 percent but stated that due to the rise in costs, it will be at the lower end of the margin outlook. In Q1 FY23, Infosys’ operating margins were over 20%.
In the Q1 earnings report, Infosys’ Chief Financial Officer, Nilanjan Roy, stated that the company is fueling the strong growth momentum with smart investments in personnel through recruiting and competitive compensation revisions.
“While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth,” Roy had said.
Wipro has also reduced variable pay for employees due to margin pressure. Managers at the C-suite level of the company will not receive any variable pay, while employee grades ranging from freshers to team leaders would receive 70% of total variable pay, according to sources familiar with the situation.
