IT major Infosys has slashed the variable compensation for employees for the first quarter of FY23, as the margins have taken a hit. This comes at a time when Infosys’ peers, Wipro and TCS, too, have taken similar decisions in the past few days. Both companies have decided to defer variable payout to a section of its employees.

Wipro will be delaying variable pay to its mid- and senior-level executives for the June quarter, reportedly due to pressure on operating margins. Similarly, TCS has delayed the variable payout by a month for some employees for the June quarter

Infosys in an email to its employees — which was reviewed by BL — said that at an organisation level, the average payout bonus for Q1 FY23 is 70 per cent. “The margin impact in the current quarter has reflected on the performance bonus for this cycle,” the mail read. 

Infosys, in an e-mail, said the company is making efforts to improve its performance in the coming quarters. “We are fuelling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While these investments have impacted margins in the immediate term, we are making structured efforts to improve our performance in the quarters to come,” it read.

A query sent by BusinessLine to Infosys did not elicit any response till the time of publication. 

Supply side pressure

The operating margins of IT companies have taken a hit in the last quarter due to wage hikes, travel costs, and continued supply-side pressure. The operating margin of Infosys for the first quarter was 20.1 per cent, a decline of 3.6 per cent year-on-year and a decline of 1.4 per cent quarter-on-quarter. The company retained its margin guidance at 21-23 per cent.

Harpreet Singh Saluja, President of Nascent Information Technology Employees Senate (NITES), an union of IT workers, said in a statement: We strongly condemn the unethical deductions being implemented by Infosys. Under the pretext of an uncertain economic environment, the company has illegally withheld the variable pay component of the employees. The net profit for last quarter is at ₹5,360 crore, or ₹12.78 a share, compared with ₹5,195 crore, or ₹12.24 per share, in the same period a year back. Revenue or turnover rose 23.6 per cent to ₹34,470 crore in April-June — the first quarter of the current fiscal year. After posting such financial results, still the company is deducting 30 per cent of variable pay which is clear exploitation of IT employees.”

Mitul Shah, Head of Research at Reliance Securities, told BusinessLine that the reason behind the delay might be the expansion of the company’s employee base. “The companies have deferred the payment as the evaluation process of new candidates and incremental staff could have taken longer as they have hired a large number of employees of late,” he added.