Bengaluru-based second largest IT bellwether Infosys has determined to scale back its average variable pay-out of employees to around 70 per cent for its June-quarter amid margin-squeeze and high employee costs.
According to the report, Infosys has reduced variable pay-out for the June-quarter FY23 to about 70 per cent and the employees have been informed about the same.
Lately, India’s multinational corporation, Wipro had to hold back the variable pay of its employees mainly due to pressure on margins, inefficiency in its talent supply chain and investment in technology. Meanwhile, the other rival Tata Consultancy Services had reportedly delayed quarterly variable compensation pay-out for some of its employees by a month.
Just a month back, Infosys had reported a lower-than-estimated 3.2 per cent rise in June-quarter net profit amid escalating costs. However, the company raised its full-year revenue growth outlook to 14-16 per cent citing strong demand and robust deal pipeline.
As reported – The company sustained the margin guidance at 21-23 per cent making it clear that with the rise in cost environment, it will be at the lower end of the margin outlook. Infosys’ operating margins were at about 20 percent in Q1 FY23.
It is believed that the higher employee benefit expenses, subcontracting costs, and travel expenses had pushed up overall costs for the Bengaluru-headquartered firm in the June-quarter. As such, elevated levels of attrition leading to higher employee costs are hitting the profitability of the Indian IT industry.
In the Quarter-1 FY23 revenue statement, Infosys’ CFO, Nilanjan Roy, had stated,” The company is fuelling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions.”
Roy added further, “While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth.”
The company had also shouted that it will continue to optimise various cost levers to drive efficiency in operations. Compensation hikes, however, impacted margins by 160 basis points, and utilisation has dipped due to the impact of new freshers coming in.
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