TCS cuts staff salaries in tune with tough times

By SiliconIndia   |   Wednesday, 30 January 2008, 08:00 Hrs
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Mumbai: A slowdown in the U.S. economy and company’s performance in the third quarter has forced Indian consultancy firm Tata Consultancy Services (TCS), for a small cut in employee salaries, reported the Economic Times. TCS is the first company to cut employee salary, based on the Q3 result.The sources also reported that a senior official from TCS has confirmed the company’s move. According to market analyst the Q3 revenue growth has not met internal targets and chances of salary hike this year is very low.

The company has cut a portion its performance based variable pay and this will cut salary of an employee by about 1.5 percent for the January-March quarter, told S Padmanabhan, Executive director and global human resources head, TCS to the ET.

"We undertake a review of variable pay every quarter and this time, we decided to make an adjustment," he said. He also said that the company will re-examine the move in April.

The company has not taken any such move for the past two years. The outsourcing sector is facing a macroeconomic challenge and it had to be factored in the quarterly review and there is no plan of cutting variable pay related to individual performance, he added.

According to a market analyst, "The cut is small and is unlikely to attract a howl of protests, but employees will get the message that all is not well with the sector. Instead of giving them a shock at the time of annual salary review, the management has sought to lower their expectations of wage inflation through this small cut¬Ē.

The company has recorded a quarter-on-quarter revenue growth of 5 percent and 6.7 percent rise in net profit for October-December.

"In the last couple of months, we have seen some lead indicators that there is moderation in wage increases. Companies have been following a little bit of a cautious approach," said E Balaji, COO, Ma Foi Consultants.

A data revealed by Ma Foi says that yearly salary hike has fallen to single percentage. Now Job-hoppers are not getting more than a 12-15 percent hike in their new jobs where as it was 25-30 percent earlier.

"It is all part of the business cycle. Once stability comes back, wages will return to normalcy," said Balaji.

Indian outsourcing industry is now facing a slowdown due to the U.S. economic worries. Major clients of Indian companies are mainly into banking and insurance sector and these companies may cut back their spending on technology and postpone upgradation.

"This wage cut is a reflection of the caution. It reinforces the management view of macroeconomic challenges," said Harit Shah, Angel Broking.

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