IT firms to cut payouts as outlook weakens

livemint.com:

MUMBAI : The information technology (IT) industry is likely to offer muted variable payouts of 60-70% of the promised amount for the June quarter, with top performers getting as much as 80%, as IT companies focus on saving costs amid a weakening revenue outlook and reduced employee turnover. “Considering the current sentiment, there is a possibility that employers take a prudent approach, and payouts will be made only to those teams whose businesses have performed well," said R. Ramesh, director of digital business solutions, professional staffing and international engagement at staffing firm Adecco Staffing.

Unlike IT product companies, which are seeing active hiring, IT services companies have curtailed recruitment efforts. The drop in attrition rates amid sluggish market conditions is another reason companies can skip workers’ demands. Analysts expect IT services firms’ June quarter earnings to be weak.

According to a 3 July JP Morgan note to clients, the June quarter earnings for the Indian IT sector are expected to be the weakest in a decade, excluding the impact of the covid-19 pandemic. This decline can be attributed to clients’ reduction in discretionary technology spending amid an uncertain macroeconomic environment. TeamLease Digital’s chief executive officer (CEO) Sunil Chemmankotil estimates the IT firms will keep their variable pay between 60-80% in the three months to 30 June.

In the preceding quarter, Tata Consultancy Services Ltd offered full variable pay, while Wipro Ltd and Infosys Ltd offered 80.25% and 60%, respectively. A spokesperson for Wipro said promotions and variable pay to employees at Wipro will continue as planned, while spokespeople for Infosys and TCS did not respond to the queries. HCL