Why IT Majors Scaling Back on Variable Payout


For the June quarter, Infosys reportedly reduced its average variable payout to 70%. 

Infosys is not the only IT company cutting back on variable compensation. 

Software majors such as TCS and Wipro recently announced that they would defer, postpone, or reduce variable payouts to employees. 

Why are India's IT giants facing a crunch?

Employees receive variable payouts based on their contributions beyond their normal job requirements. 

Variable payouts are also known as performance pay.

There are two main factors that determine it: employee performance and the performance of the company. 

In the June quarter, most of these IT giants are cutting back on variable payouts. 

In the first quarter of 2023, Infosys reported a lower-than-expected rise in net profit, 3.2%, due to increasing costs. 

Infosys' overall costs rose in this quarter as employee benefits, subcontracting, and travel expenses soared. 

Even though the company maintained its margin guidance of 21-23 percent, it still clarified that the increase in costs would cause the margin outlook to fall. 

As of June, the IT giant had operating margins of 20%.

As a result of pressure on margins, Wipro also decreased variable pay. 

Increasing investment in technology and inefficient talent supply chain increased the company's costs, the IT giant said. 

Employees in grades C and above will not receive variable payouts for the June quarter, the company announced. 

Junior-level employees will receive 70 percent of their variable pay.

TCS, India's largest IT services company, also delayed variable payouts for grades C3A, C3B, and C4.

TCS has also delayed the Performance bonus for certain employees. 

The company said that when it comes to paying out variable compensation the massive size of the workforce is posing a problem.