IT sector doles out huge bonuses to stem attrition
IT majors are scrambling to retain their talent and how! If the figures since the beginning of the year are any indication, then companies are pulling out all the stops to ensure that the critical talent base does not eroded more than it already has.
In the first week of January, Infosys announced that it had paid 100 per cent of the variable bonus payout to its employees for the December quarter. Chief Operating Officer UB Pravin Rao said, “We have made 100 per cent variable payout for Q3 and have seen a further decline in attrition as a result of multiple initiatives taken over the last few quarters.” The IT major had been hit by a series of high-level exits, especially from the senior leadership team. Once Vishal Sikka took over the mantle, there were a slew of measures that were introduced. Sikka approved more than 5,000 promotions in a bid to retain key talent and boost employee morale.
Not only is the company doling out more money, it is also training more than 9,000 employees in the fields of design thinking and artificial intelligence. The company has partnered with Stanford Global School of Business for an executive education program. In mid last year, the company did away with variable pay for entry-level executives or those with zero to three years experience.
Tata Consultancy Services kicked off bonus annoucements from the IT sector earlier this month when it announced a Rs 2628 crore mega bonus for its employees. The company took a massive hit—an over 27 per cent year-on-year drop in fourth quarter net profit to Rs 3,858 crore. The one-time bonus was offered to employees, who had completed at least one year of service, to mark the 10th anniversary of the company’s initial public offering in 2004. Each employee was given a reward equivalent to one week’s salary for every year of service at TCS. This amount is probably one of the biggest payouts that India Inc has witnessed.
In an interview to ibnlive.com, MD & CEO Natarajan Chandrasekaran said, “There was a discussion on the bonus at the board, and I am happy it was considered favourably. The pay-out will be done in April and May. But the company has decided to recognise the liability upfront and provided for it in the March earnings.” To put it into context, the company alone brings in more than 60 per cent of the total profit of Tata Sons. TCS has been struggling with attrition, especially since the news broke out in December that the company was planning massive layoffs. The overall attrition figures for TCS was at 14.9 per cent in the fourth quarter.
In this week, Wipro announced the allotment of 18,819 shares worth about Rs 1 crore at the current market price to eligible employees under the restricted stock units plans of 2005 and 2007. In a filing to the Bombay Stock Exchange, the company said, “Administrative Committee of board of directors has passed a resolution in their meeting held on April 20, 2015 to issue and allot 18,819 equity shares of Rs 2 each pursuant to exercise of the stock options by the eligible employees under Restricted Stock Unit Plan 2005 and Restricted Stock Unit Plan 2007.”
On the other hand, Cognizant—known to be a generous paymaster—has given its employees a lower bonus. The annual bonus payout is in the range of 100-130 per cent instead of 100-200 per cent depending upon the performance of its employees. Cognizant’s CFO Karen McLoughlin said the company adjusted its incentive compensation downward to reflect the margin impact of accelerated hiring and other investments. It had provided double-digit hikes to its employees last year and promoted a third of its programmers. “This year's salary revisions are designed to be market competitive, differentiate niche and critical talent, and reward high performance,” Cognizant CEO Francisco D'Souza said in a blogpost to employees.
Why are companies worried
While the overall attrition rate for the year is predicted around the range of 15-20 per cent, the attrition rate in the IT sector is expected to go up to 20-25 per cent. Software body NASSCOM has estimated that the attrition levels in the sector are likely to rise this year as the overall economy improves, increasing the chances of more jobs on the ground.
The HR departments in these companies will have their hands full as they struggle to keep their attrition numbers low by improving employee engagement while keeping worker productivity high. The IT sector is facing manifold challenges than before—The Make In India campaign and the aggressive hiring by e-commerce companies. Now, it remains to be seen how well the companies will cope increased attrition numbers and what they will do to retain their key employees. Watch out this space for more updates!