In IT, salary hikes not for all, tenure matters

BENGALURU: The days of predictable salary hikes in the IT industry seem to be a thing of the past. With a sharp slowdown in the sector, companies are becoming very selective about who will be given annual increments, and how much. Performance and even tenure of employees in the organisation have become major considerations.

Infosys, Wipro and HCL have all deferred their increments this year - it used to be effective from April or July, but is now effective several months later. Infosys has just announced hikes effective November 1. And they have excluded juniors and mid-level employees who were onboarded after October 2021, and seniors who joined after October 2020.

In a town hall after the September quarter results, Infosys HR head Shaji Mathew had said that tenured employees and high performers would be the focus of the compensation review cycle. An email to Infosys seeking confirmation of this did not elicit a response.

HCL Technologies has rolled out hikes effective October 1, but only for junior employees. There's nothing for mid and senior level employees. Wipro has rolled out hikes effective December 1, but top performers with high salaries have not been considered in the current appraisal cycle.

Last year, TCS made certifications in new tech skills a mandatory component of the variable pay for mid-level employees under its mid-level transformation programme.

The changes in salary increment models is seen as part of a larger strategy to maintain margins in an overall weak environment - companies are also scaling down fresher hiring, improving employee utilisation, reducing subcontractor expenses, and lowering cost of lateral hires that had shot up during the pandemic. But while business slowdown is a big reason for the changes, some also attribute it to the way the business and technology ecosystems are changing.

Ram Murali, partner at growth advisory firm Catalincs, says there has been a structural decline in margins for many IT services companies because of their inability to implement competency-based pricing. "While companies pay a premium to attract and retain digital talent, they do not always realise commensurate premium revenue for digital solutions which often gets bundled into larger commercial constructs. This is an unsustainable model, resulting in those with niche capabilities being rewarded with wage hikes and promotions, and those with traditional skills who continue to run clients' core businesses often getting excluded," he said.

Ray Wang, CEO of Constellation Research, says the world has moved from humans competing with each other, to competing with bots and AI. "In some bids at big deals, many service providers have lost to competitors coming in at 20-30% below the norm. Why? The bids assume that bots will deliver the work over human labour," he said.