IT majors may have incurred higher costs for insurance, health benefits for staff in June quarter

Leading IT companies Tata Consultancy Services, Infosys and Wipro reported significant increase in employee benefit expenses for the June 2020 quarter ― the peak of the Covid-19 pandemic. This is despite a freeze in hiring. While higher variable pay to reward employees Working From Home (WFH) during the pandemic is one of the main reasons for the increase, companies may have incurred additional costs like insurance and health benefits for employees, which could have added to the expenses, feel analysts.

Infosys saw a 10.58 per cent increase in employee benefit expenses to ₹13,604 crore in the June 2020 quarter, against ₹12,302 crore in the corresponding quarter previous year. Similarly, TCS reported a 6.17 per cent increase to ₹22,093 crore (₹20,809 crore) and Wipro a 3.60 per cent increase to ₹8,026 crore (₹7,747 crore).

Saurabh Govil, President and CHRO (Human Resource), Wipro, told analysts that like in the previous year, for most of the employees the company had paid 100 per cent variable pay.

Q4 was 100 per cent variable pay, which was paid to all its employees in the middle of the pandemic in the month of May. The leadership took a bigger cut but the majority got reasonable variable pay, he said.

“We delivered 22.7 per cent operating margin which is an expansion of 220 basis points YoY and 160 basis points sequentially. This was achieved after rewarding our employees with a higher variable pay,” Nilanjan Roy, Chief Operating Officer, Infosys, told analysts.

Rewarding employees

Rewarding employees, especially the over-performing ones, with higher variable pay during times of crisis is typically a strong morale booster. While attrition also came down across all vendors, vendors know that retaining highly-skilled, loyal personnel can be a hard task, said Boz Hristov, Professional Services Senior Analyst, Technology Business Research Inc.

Just a few months ago ― before March ― most vendors had been struggling to find high-calibre talent. Vendors, notwithstanding the efforts to optimise costs, understand the value of loyal employees who can be the backbone of companies and go the extra mile when necessary. These employees are also more likely to stick around after the crisis abates, he added.

According to Yugal Joshi, Vice-President, Everest Group, companies may be adding cost, such as for laptops, VPN devices, security software, and productivity software as part of benefits, for WFH initiatives. They might have given some one-time money to tackle the pandemic in terms of buying specific items for employees and family. More so, many employees might have claimed insurance and related health benefits, given the pandemic.

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