IT services firm Cognizant may increase the variable pay component in the compensation structure of its employees in order to lower costs, as per an ET report.

The NASDAQ listed software services exporter is restructuring itself under the leadership of the new CEO Brian Humphries, which includes reducing management layers and rethinking its sales and business strategy. Rejigging compensation structure is another measure in a roadmap that is aimed at making it ‘fit-for-growth’. 

As per the report, variable pay is a smaller component of compensation, but the idea is to increase variable pay to actually reward contribution and growth. It could be 35% or more in mid-levels but it won’t be significantly higher for freshers, who are on a low base.

Reportedly, there is still no clarity on what proportion of an employee’s salary would turn into variable pay as the discussions around change in compensation have just begun. However, CEO Humphries, who is spearheading the overhaul, had stated earlier that changes to compensation were being considered. He added that the company was still underperforming on revenue growth and profitability. 

The company has created a transformation office that is looking at six aspects, including talent, which will include compensation structure, along with attracting and retaining talent and skills, as stated by Humphries n a post-earnings press conference last week. 

This is not the first-ever measure being considered by Cognizant to improve margins. In May this year, to keep the pyramid lean to improve its margins and accelerate revenue growth, Cognizant had offered voluntary separation to at least 300 top executives.