Coronavirus impact: Hikes, bonuses on the block as IT firms get ready for slump
India’s IT services companies may freeze pay hikes and cut bonuses to deal with the business slowdown sparked by shutdowns due to the Covid-19 outbreak globally, replicating moves made during the US financial crisis over a decade ago, senior executives and analysts told ET.
“Bonus, variable pay or any increment is right now on hold,” C P Gurnani, CEO of Tech Mahindra told ET. “At this stage, most of the world is addressing their first priority: keeping people safe”.
Tata Consultancy Services has already completed its annual appraisals for the year, but has not yet decided on the payouts, said a senior TCS executive, who did not want to be named.
“We are still dealing with the immediate fallout. No discussion on pay freezes has been done,” the TCS executive said.
Companies such as Wipro, HCL Tech and Infosys hand out hikes later in the year.
“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,” said Peter Bendor-Samuel, CEO, Everest Group.
However, if the compensation adjustments are made to keep profits high then the firms are likely to have morale and turnover problems going forward, he added.
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, a Nasscom executive said. New deals are not being signed and old ones are being placed on standby, the person said.
“We are still dealing with the immediate fallout. No discussion on pay freezes has been done,” the TCS executive said.
Companies such as Wipro, HCL Tech and Infosys hand out hikes later in the year.
“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,” said Peter Bendor-Samuel, CEO, Everest Group.
However, if the compensation adjustments are made to keep profits high then the firms are likely to have morale and turnover problems going forward, he added.
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, a Nasscom executive said. New deals are not being signed and old ones are being placed on standby, the person said.