TCS to release variable pay to only 70% of employees in Q2 FY23

Tata Consultancy Services (TCS), the largest IT services company in India, would pay only 70 per cent of its employees variable pay in the second quarter of 2022, while others would be paid variable pay depending on their ‘business unit’s performance’, the company announced during their latest earnings call on Monday.

Milind Lakkad, chief human resource officer at TCS, said during the earnings call, “We are going to pay 100 per cent variable pay for 70 per cent of employees. The remaining 30 per cent will get paid based on their business unit performance. This is for Q2, July-September.”

Variable pay, better understood as performance pay, depends primarily on the company’s performance. Interestingly, TCS reported Rs 10,431 crore net profit in the July-September quarter of 2022, crossing the Rs 10,000 crore mark for the first time in a quarter.

Rajesh Gopinathan, chief executive officer and managing director at TCS, said during the earnings call, “This was the milestone quarter for us as we crossed Rs 10,000 crore in net profit. On the financial perspective it was a satisfying quarter.” He further added, “We closed the quarter on a strong note.”

Harsha Upadhyaya, chief investment officer and President of Equity at Kotak Mahindra AMC noted in a discussion with Business Today about the Indian IT sector: “While the management commentary is still quite positive, we believe that things are not likely to be the same as you go forward.”

It is worth noting that TCS had postponed variable pay of some of their employees in the first quarter of the financial year as well. The variable pay for the April-June quarter was paid in August, as per an internal email circulated by the company.

While TCS had delayed variable pay in the previous quarter, IT companies like Wipro had deferred the same for employees in the C-band and Infosys had slashed it to 70 per cent.

Within the industry, at the moment, there is considerable worry that the Indian IT sector is facing a slowdown owing to the macroeconomic problems that the West is currently being confronted with. Siva Prasad Nanduri, the Chief Business Officer at the HR services firm TeamLease Digital, told BT that the Indian IT sector is indeed going through a slowdown because of the economic downturn in the West.

He said, “It is true that Indian IT companies have significant exposure to the West which is going through an economic downturn. Number of projects have also reduced.”

Also Read: Why IT majors Infosys, Wipro, and TCS are scaling back on variable payout? - BusinessToday

Also Read: Why has Goldman Sachs downgraded IT giants TCS, Infosys, and Tech Mahindra, while upgrading Wipro - BusinessToday