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Abhrajit Gangopadhyay

Wipro had earlier initiated a variable pay structure where a percentage of the compensation was tied to the division's profitability.

BANGALORE, June 23

WIPRO Ltd expects the impact of its forthcoming selective salary hikes at the middle-management levels to be nullified by an entry-level salary cut that was effective last year.

The company had slashed entry-level salary to $343 per month from $471 per month last year as it battled to maintain margins in a soft pricing environment.

In the January-March quarter, Wipro hired 872 people and utilisation level increased.

This was reflected in a six per cent hike in total man-months that the company billed during the quarter.

Wipro had earlier initiated a variable pay structure where a certain percentage of employee compensation is tied to the profitability of the division.

The variable compensation is across verticals and ranges between 30 per cent and 300 per cent.

A recent Salomon Smith Barney report also said that it believed that margin pressure due to salary hike would be nullified by the cut in entry-level salary.

Analysts believe that tier I software vendors like Wipro would continue to report strong top line growth though there would be steady erosion in operating margins going forward as clients would cut prices backed by more outsourcing efforts in order to shrink their costs.

Moreover, a hardening rupee would eat into margins of the local software exporters.

In the fourth quarter of 2002-03, Wipro reported its operating margins slipped by 350 basis points, dragged by a strong rupee, one-off bonuses for AMS buy-out, a two per cent drop in offshore rates and sharp hike in selling and marketing expenses.

"The cost of procuring new businesses will continue to be high... this component will permanently keep the margins under pressure for sometime now," an analyst with a foreign brokerage said.

Wipro reported a rise in onsite volumes by close to 12 per cent in the last quarter, indicative of robust project starts and increased package implementation types of projects.

The company had earlier said that revenues for the Global IT Services business are likely to be $172 million in the current quarter, up three per cent sequentially.

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