‘Nothing Short of Theft’: IT Firms Under Fire for Reducing, Delaying Variable Pay

New Delhi: Employees’ unions in the country’s Information Technology (IT) sector are not happy with the latest cost-cutting measures taken by tech firms, which involve reducing the average variable payout of its staff in the name of optimising the wage bills, as the former terms the move as “nothing short of theft”.

The unions say no reason justifies the recent announcements made by the IT giants in the country calling for cuts or delays in performance-linked incentives given to the employees, as these do not take into consideration employee welfare.

As the Indian IT industry is reporting a moderation in demand for its services, after having a golden run over the last couple of years, major tech firms are resorting to cutting down perks in the name of restricting operational expenses. According to the companies, high attrition rates in past quarters have led to increased employee costs which subsequently impacted their operating margins.

They also argue that the ongoing geopolitical concerns have created greater uncertainty for trade and commerce. However, all this hasn’t gone down well with IT unions, which increasingly want the government to play a role in safeguarding employee interests.

Earlier this month, India’s second-largest IT services provider, Infosys, announced a deduction of 30% in the average variable pay of its employees for the June quarter, saying that margin squeeze, owing to high employee costs, had prompted the Bengaluru-headquartered firm to take the decision.

Likewise, larger rival Tata Consultancy Services (TCS) is also said to have delayed quarterly variable compensation payout for some employees by a month. Recently, Wipro also held back the variable pay of its staff.

If industry experts are to be believed, among the reasons behind the latest cost-cutting measures announced by IT firms is the talk of impending recession within US and European economies, the fear of which is making the second half of the year a challenging one for India’s IT sector. According to the companies, global concerns involving the Russia-Ukraine conflict and China-Taiwan tensions also hold the potential for upending the domestic IT industry.

These reasons, however, do not “justify” the cuts or delays in average variable payouts for tech employees, Harpreet Singh Saluja, president of Pune-based Nascent Information Technology Employees Senate (NITES) told NewsClick over phone on Monday.

“During the fight for talent in the last fiscal, many companies started incentivising their recruits with joining bonuses and salary hikes, along with other benefits, were given to prevent existing employees from quitting,” Saluja explained, adding that the salary of an IT employee usually has both, a fixed and a variable component, with the latter being around “20 to 25 %” of the total pay. Any cut in the variable payout, now announced or mulled by the IT giants, is nothing short of theft,” Saluja said.

These are performance-linked or target-based payments that the companies had promised to an employee at the time of their recruitment. “How can they, under any pretext, announce such cuts that have been promised?” he asked.

Chennai-based Union of IT and ITeS Employees Union (UNITE) general secretary Alagunambi Welkin endorsed this view, questioning the IT companies’ line of argument behind the recent announcements. “The latest cuts or delays are driven by the general trend of passing the burden on to employees, without considering their welfare, during an economic crisis. Several tech firms are also talking about reducing their headcount. Such moves are only to be expected in the near future,” he told NewsClick over the phone.

Post-pandemic, as physical movements of goods and people were restricted, the ensuing growth in digitalisation created unprecedented demand for Indian tech firms. In FY 22, riding high on it, the domestic IT industry recorded a 15.5 % growth – the fastest in more than a decade – to cross the $200 billion mark, including $178 billion in exports, as per data from industry body NASSCOM, as cited in a report in the Hindu Business Line.

Some experts are of the view that most IT firms, while focussing on optimising their costs, might also want to redirect investments towards maximising their growth. This view is also supported by the fact that companies like Infosys have raised their full-year revenue growth outlook to 14-16% citing a robust deal pipeline, according to news agency PTI.

Kiran Chandra of the Hyderabad-based Forum of IT Professionals (ForIT), told NewsClick that announcements of cuts in variable components of the employees’ salaries, “is not only unjust but also could be illegal.” According to him, the service conditions of IT employees are governed by the Industrial Employment (Standing Orders) Act, 1946 and The Payment of Wages Act, 1936.

“The Labour Department must take a suo motu cognisance of the matter and see whether such cuts in the salaries of employees can even be announced as and when a company wishes to do so,” Chandra said.

IT unions in the country, which started their activities not so long ago, are not new to the cost-cutting measures of tech firms. In May this year, Newsclick had reported on how the spurt in termination of contracts and layoffs of employees at a number of domestic startups was flayed by the unions which instead vowed to intensify their campaign for pressing legal protection for IT employees.

On Monday, Saluja of NITES reiterated that the Central and state governments must ensure that the rights of the IT employees are protected. “For many decades now, in the name of having growth, a green carpet was provided to IT companies. However, interests of the employees in the sector remained mostly neglected, which must be protected – now more than ever we talk about the recession fears,” he told NewsClick.

Similarly, Welkin of UNITE said his union had been pressing for many years now for a “tripartite forum” where multiple issues within the sector can be discussed, but to no avail.

“In our experience, the government has remained a silent spectator. Hence, our focus is now to form company-based unions to collectively fight the unjust policies of the IT firms,” he said.