Last week, according to reports India’s IT industry was likely to halt pay hikes and cut down the bonuses to deal with the business slowdown caused by the nation-wide lockdown.
But here is the good news!
Despite the grim news regarding pay hikes and bonuses, Indian IT firms as of now won’t be resorting to any major staff cut-downs.
Read to find out more…
Will Companies in India Hand out Pink Slips to its Employees?
The COVID-19 outbreak has brought many businesses to evaluate their future plans to stay in the market post-pandemic.
The US giants such as Salesforce and Morgan Stanley, whose CEOs have taken the public stand of not laying off employees. The CEOs of significant companies such as Salesforce, Visa, Morgan Stanley, Citigroup, Bank of America, and FedEx have taken the pledge not to pursue any significant layoffs in 2020.
On the other hand, the Indian IT firms are unlikely to take such a pledge publicly. Unlike many US firms, Indian IT firms do not have any layoff policy owing to its political sensitivities. But employee lay-offs due to “underperformance” are common.
In Indian IT industry, 55-60% of the operating expenses comprise wages. Hence any verdict not to reduce the staff base can adversely impact their cost structure.
A source familiar with the matter said, “Indian IT services firms are not likely to take any public stand on layoffs like many US firms. But firing staffers owing to business disruption and consequent demand slowdown is not likely to happen in a big way. Increments, bonuses, and variable payouts are going to be on hold for the middle and senior managements.”
Can High Employee Utilization Levels of Companies Help the Business Slowdown?
Meanwhile, some experts say given the high employee utilisation level and the strength of the reserve employees who are not allocated in any projects, companies are in a better position to absorb the adverse impact on cost. The utilisation level of Infosys stood close to 85% (excluding trainees) at the end of the Q4 of 2019-20 (FY20), while it was around 80% for Wipro.
Tata Consultancy Services (TCS) didn’t unveil its utilisation level for Q3 of FY20. It however, said it had increased its utilisation levels in the quarter, which complemented its operating margin.
The companies will surely halt pay rise, increments and variable salaries. An HR expert said, “The variable salary constitutes around 40% of the pay of the senior management. Given the current situation, sales targets are unlikely to be met in the current financial year. So, payouts will definitely be lower.”
Which Companies in India Won’t Be Participating in Layoffs?
Cognizant, with its major workforce of 65% in India, has announced paying an additional 25% of the basic pay to most of its staff in India.
Many large firms, including Bajaj Auto, the Vedanta group, and the Essar group have announced not to reduce their workforce.
A demand slowdown is looming over the IT services industry as reports suggest deals worth $3-4 billion have been suspended in this month alone.