From Wipro to LTIMindtree, IT employees irked by another delay in salary hikes

While Wipro, HCLTech, Tech Mahindra and LTIMindtree are yet to decide on wage hikes, Infosys, which had given FY23 in last November as against the usual June, isn't thinking about FY24 hikes yet.

 

“We are evaluating, considering all the factors that we always consider including inflation, including when was the last wage revision taken, the environment, the macro environment as well as the peer practice," Infosys chief financial officer Jayesh Sanghrajka told analysts in a post-earnings call on 18 July.

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The delay comes on the back of a sharp fall in headcount in FY24 of the top four firms. HCLTech, the third-largest IT services firm, saw its headcount rise 0.68% in FY24, but thereafter reported its sharpest fall in headcount of 8,080 in the first quarter of FY25 (April-June).

Mumbai-based Tata Consultancy Services Ltd, the No. 1 IT services company, is the only one to stick to its wage hike cycle, giving the hikes in the previous quarter.

Who's delaying salary hikes

Both Tech Mahindra Ltd and LTIMindtree Ltd, the country’s fifth and sixth largest software services companies, respectively, have delayed annual salary hikes to their employees.

“We have not made a decision on wage hikes yet and we have shared with the teams that this is something that we will be looking at only in the second half of the year, depending on the financial conditions at that point of time," said Mohit Joshi, chief executive officer of Tech Mahindra, at the company’s post-earnings press conference this July.

LTIMindtree in its post-earnings interaction with analysts said it will be giving hikes in the third quarter of the current fiscal (October-December). The Mumbai-headquartered company would typically give hikes around July-August, according to a person with knowledge of the matter.

On the other hand, HCL Technologies Ltd and Wipro Ltd, which are to give hikes later in the year, have not set a date.

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“I think I don't want to speculate too much about the wage hike timing and one-term, etc. Like Ram (Ramachandran Sundararajan, chief people officer of HCLTech) mentioned at the press conference, it is still a decision which is work-in progress," said Prateek Aggarwal, the company's chief financial officer, in the post-earnings analyst call.

Bengaluru-based Wipro pushed the wage cycle by three months last year, disbursing hikes to its 240,000 employees in December. This year seems no different.

“We have not decided when to give the salary hikes. We will decide in this quarter but will be in line with the market whenever we decide," said Srinivas Pallia, CEO of Wipro, in the post-earnings analyst call.

The cost of services

IT services is a people-led industry and employee costs make up more than half of the overall costs incurred by these companies. Trimming salary costs, which include wage hikes, is a lever used by the companies to spruce up or maintain operating margins.

While controlling expenses given to external employees is a tact used by IT services companies to push operating margins, salary costs to their employees play a bigger role.

Each of the four IT services companies mentioned above, have reported their best April-June quarter margin performance in three years in comparison with the preceding three months.

The employee's incentive

Inside companies that have not yet set a date or have delayed hikes, employees are jittery and unhappy as this is the second straight year they have faced the brunt.

Salary hikes are the primary job incentive for junior level employees, who have around three years of experience and earn about ₹4 lakh per annum. These employees make up the bulk of an IT services company’s workforce and a delay in hikes can lower morale.

“To keep employee morale high, the company must have given hikes," an employee of a top IT company said, requesting not to be named. "If it (salary hike) doesn’t happen this quarter, it won’t happen this year. The management does not have intent and will push the ball to another quarter."

Also read | Salary hikes to be lowest in three years. But it’s not all bad

“We get to know more about salary hikes from news organisations than from our own company’s management," quipped a second employee of the firm, reflecting the lack of communication from the company in addition to the delay.

To be sure, it is not just lower-level employees who look forward to hikes, but also the slightly more experienced program managers who seek a fatter paycheck.

“If key program managers on the sales side and delivery leave, the growth momentum can’t be maintained and it will only imply that there will not be a bump in revenue," said the first employee mentioned above.

The job-hopping lure

A third employee believes that employees look at competition offering more lucrative wage hikes. “Many employees look at salary hikes when they are looking to switch jobs. They stay with a company for a year and then leave if they don’t get hikes because once they leave, they know they will inadvertently get a higher salary upon their exit from the company," this employee said.

An expert believes this job hopping can pose a difficulty for homegrown software services companies in the future.

“Companies may face difficulties retaining junior talent as these employees might seek opportunities elsewhere with better compensation packages," said Krishna Vij, vice-president for IT staffing at headhunting firm TeamLease Digital, adding that this could lead to a widening skill gap between junior employees and those with specialized skills.

"Over time, companies might find it challenging to manage wage costs if they do not maintain a balanced workforce that includes both junior and senior employees," said Vij.

However, at least one analyst said that employees don’t have that option to switch jobs.

“Employees can’t leave their present company in search of jobs that would give them hikes or more hikes simply because those companies were not hiring as much. Therefore, the bargaining power is in the company’s hands and they can call when to give or not give hikes," said a Mumbai-based analyst on condition of anonymity.

Another analyst attributes the companies’ delay in wage hikes to slow growth and low attrition levels.

“Growth has been slow at 3-5% for most companies, attrition levels have also been lower, which implies that companies aren’t worried that folks will leave if they aren’t paid more," said Ray Wang, founder of Constellation Research.

“The services companies are betting that the employees won’t be leaving in the short term and that the revenues will come back in the next 12 months so they can put raises back on the agenda," added Wang on the future implications of hike delays.