Indian IT services major Infosys has announced reduced variable payouts for employees at 73% of the total for October-December 2023, marking a drop from the 80% paid out in second quarter. Variable pay at Infosys serves as a profit-linked bonus that is calculated each quarter based on the company’s financial performance.
The lower variable salaries, despite Infosys registering strong 13.4% year-on-year growth in net profit for the third quarter at Rs 6,586 crore, mirrors client pressures weighing on near term tech spending sentiment globally. Consequently, Infosys has turned prudent with costs.
Drop Follows Cautious IT Demand Outlook
Experts observe that the sequential dip in variable payouts follows a cautious demand outlook for the sector signalled by Infosys. While raising its full year revenue guidance marginally upward to 16-16.5%, the company expects just 1-2% sequential growth in the March quarter – relatively subdued historically.
Top clients especially across banking and retail in developed markets are squeezing budgets amid worries of a looming global recession. This has had a slight dampening effect on margins. Lower incentives help Infosys protect profitability as it accounts for attrition and higher input costs.
Variable Pay Critical Component of Packages For Indian IT firms’ high-skilled employees, variable pay often constitutes one-fourth to one-third of the total salary package. Infosys staffers typically receive higher proportions of variable pay than most peers. Hence despite high attrition, the company remains an attractive long term destination for techies given the upside earnings potential when times are good.
This also means employees see their disposable incomes fluctuate each quarter based on both company and industry level business cycles, even as base pay remains intact. With macros still mercurial, lower bonuses may persist for a few more quarters industry analysts forecast.
