TCS mulls variable pay cut; staff to work more

In a clear admission that it is facing hard times, India’s largest software exporter Tata Consultancy Services (TCS) said it plans to review the variable component of employees' salaries every quarter in an attempt to cut costs. Variable pay accounts for 20 to 35 per cent of TCS employees' gross salary, depending on their hierarchy.

The company had earlier cut employees' variable pay by around 1.5 per cent in February 2008.

“We are trying to reduce costs. Our largest expenditure -- around 55 per cent of our gross revenue -- is manpower cost and employee salaries. We are not contemplating a pay reduction, but we are reviewing the employee variable pay," CEO and MD S Ramadorai told reporters here today.

All employees, from trainee to the senior-most manager, get variable pay. The total variable component -- which is linked to both the performance of the company as well of the individual — accounts for around 8 per cent of the company's gross revenue.

"We are also increasing employee working hours from 40 hours a week to 45 hours a week, with effect from April 1,” he added.

The company may also defer absorbing nearly 24,500 campus recruits, scheduled to join in June. Their salaries may also be revised, said Ramadorai.

According to analysts, a 10 per cent increase in working hours could add half-a-million billable hours for TCS alone, given that over 55 per cent of the company's contracts were the Time & Material variety.

The Rs 35,000-crore TCS also expects flat or lower Q4 results because its US clients have started pressing the company for a reduction in price ranging from 4 to 15 per cent. "Q4 results will either be the same as the third quarter or may see a dip,” Ramadorai indicated.

The company also plans to delay infrastructure and new projects to save costs. "Capital expenditure of TCS in the next financial year will be less than the Rs 1,400 crore announced for 2008-09,” Ramadorai said.

The company has reportedly laid off over 100 employees in the UK. “A lot of our work is on contract. Also, we retain employees, especially the ones on probation, on performance, and if their performance is not up to the mark, we ask them to leave. Although I am not sure why the employees in the UK were asked to leave, two of the reasons could be that their contracts ended or bad performance. Going forward, a lot of emphasis this year will be on employee efficiency,” Ramadorai said.

“We are also focusing on more offshore projects right now to cope effectively with the recession, by moving more roles and delivery functions to offshore locations such as India,” Ramadorai added.

TCS serves customers such as British Airways, BT and United Utilities in the UK. The company has around 4,800 professionals working at almost 65 customer sites in the UK and Ireland.

“In the last nine months, TCS has hired 30,000 people. For now, we have frozen our lateral hiring and may look at laying off employees if the situation does not improve. Currently, we have around 1,30,000 employees on our pay roll,” Ramadorai added.