#Coronavirus: Tech Mahindra Halts All Bonuses, Increments; TCS, Wipro, Infosys, HCL Can Follow Suit

Coronavirus has brought the economy of many countries drastically down! The escalating cases of the virus is causing the companies to shut down and forcing people to work from home.

Amidst this chaos, India’s IT services companies are replicating the moves made during the US financial crisis a decade ago as told by senior executives and analysts. The companies may halt pay hikes and cut bonuses to deal with the business slowdown caused by sudden shutdowns.

Read to find out more…

Priority Lies in Keeping People Safe!

India’s IT sector firms and other companies have asked the majority of their employees to work from home. The trainees are also sent back home from campuses with an aim to implement social distancing norms and reduce the spread of the virus. Most India-based IT services firms have eight out of ten employees working in centres locally.

C P Gurnani, CEO of Tech Mahindra, told ET, “Bonus, variable pay or any increment is right now on hold. At this stage, most of the world is addressing their first priority: keeping people safe”.

How is the Covid-19 Pandemic Affecting the Growth of the IT Industry?

The analysts are revising the growth for the IT industry for the fiscal year 2021 following the fallout of the outbreak in key markets in the US and Europe. 

A Nasscom executive said, “IT companies have seen demand and bill rates crash, as clients have moved to doing only the most crucial work to keep their business running. New deals are not being signed and old ones are being placed on standby.”

Peter Bendor-Samuel, CEO, Everest Group said, “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.” In addition he stated that if the compensation adjustments are made to keep profits high then the firms are likely to have morale and turnover problems going forward.

Will this declining demand and standbys lead to layoffs in the near future?

Freezing the Bonuses and Hikes as Companies Struggle to do Business!

Kotak Institutional Equities has cut revenue growth estimates of some large and mid-cap tech services companies by 2-4% and of the industry by 3-8%.

Accenture on March 19 cut its guidance for FY20 (September-August) referring to the uncertainty due to the rapid spread of the virus. The earlier forecast for its growth was 6-8% but now it is expected to grow in the range of 3-6%. In the first six months, it has grown revenue by 8%, effectively indicating that business will be flat or negative in the next two quarters. Accenture’s business is crucial so as to measure the impact of the outbreak on other Indian IT companies. 

Senior Tata Consultancy Services (TCS) executive said that the company has already completed its annual appraisals for the year, but has not yet decided on the payouts. In addition he said, “We are still dealing with the immediate fallout. No discussion on pay freezes has been done.” 

Companies such as Wipro, HCL Tech and Infosys hand out hikes in the later half the year.