Pressure on the Bengaluru-based company’s operating margin in the current quarter has reflected on the quarterly performance bonus payout, Infosys, India’s second-largest IT services provider by revenue, said in an internal mail.
ET has reviewed a copy of the email.
“We are fuelling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While these investments have impacted margins in the immediate term, we are making structured efforts to improve our performance in quarters to come,” according to the email.
The final payout will depend on individual department or unit guidelines, it added.
Infosys did not respond to emails seeking comment till press time Monday.
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Last week, – the fourth largest IT services provider by revenue – said in an email that employees belonging to C bands and above (managers to C-suite level) will not receive any variable payouts, while associates in A & B bands (freshers to team leader levels)
will receive 70% of target variable pay for the quarter subject to a billability threshold.
The development came after operating margins took a hit in the first quarter.
India’s largest software services firm,
Services (TCS), had also
delayed quarterly variable pay to select bands of employees by a month citing “administrative” reasons.
In the quarter ending June, Infosys’ margins fell 150 basis points sequentially to 20.1%, dragged down by salary hikes. The company had however maintained its guidance for operating margin at 21-23% for the ongoing fiscal year.
It has provided a cautionary note that margins will remain at the lower end of the band in the near term due to wage pressure.
“Cost optimization measures will kick in, utilization, pricing automation among others as we go ahead, so we are confident that margins are at the bottom-end,” chief financial officer Nilanjan Roy said during its post-earnings conference in July.
Infosys recorded an attrition rate of 28.4% in the June quarter, up from 27.7% sequentially, making it the highest among the top five Indian IT firms.
The company, however, maintained that the attrition had improved on a standalone basis. Analysts said the companies will undertake bold moves to cut costs as attrition may have peaked.
They also said paring performance-linked bonuses may be an indication of revenue growth slowing down.
IT companies have been facing falling operating margins and rising attrition rates over the last few quarters.
According to an internal email by Wipro, which ET has reviewed, the company is seeing continued pressure on operating margins.
“Our Q1 margins were lower at 15% due to inefficiency in our talent supply chain, project margins and our investments in talent, technology and solutions during the quarter… Given our underperformance on margins this quarter, our variable pay (including sales incentives) takes a hit,” it said.
Earlier this month, rating firm ICRA projected a moderation in the revenue growth and operating profit margins for its sample set of 13 major listed Indian IT companies.
Year-on-year growth is expected to moderate to 12-14% in the ongoing fiscal year due to macroeconomic conditions and inflationary headwinds across key markets, impacting investments in technology by clients, it said.
