The week marked the announcement of earnings results for the second quarter of FY23 from top Indian IT companies TCS, Infosys, Wipro, HCL Tech, and others. Most companies announced bumper profits, but scaled down on variable pay, a part of employee compensation that is dependent on performance.
What is variable pay?
Variable payout, also known as performance pay, is a part of the employee compensation that depends on both the performance of the employee and the overall performance of the company.
The variable pay comprises of two parts. The variable pay that employees receive each month depends on their individual performance. All employees receive this unless they are on the bench.
A Software Engineer working at TCS Digital explained, “The monthly performance pay is given to us every month as a part of our salary as it is dependent on our performance in that month. We all get it unless we are on the bench.”
The bench refers to the section of staffers that have not been assigned a project. These employees are still entitled to salary since they are on the payroll of the company.
The second component of variable pay, the component on which IT companies have been scaling back, depends on the company’s performance in that quarter.
Siva Prasad Nanduri, the chief business officer at TeamLease Digital told Business Today, “The variable pay that is being talked about in the earnings call is dependent on the company’s profits in that quarter. If the company performs well, employees get the variable compensation.”
How did the top IT companies perform this quarter?
The second quarter of FY2022-23 ringed in bumper profits for top Indian IT companies. TCS reported Rs 10,431 crore profit, crossing the Rs 10,000 crore mark for the first time in a quarter, marking an 8.4 per cent year-on-year rise. Infosys reported an 11 per cent rise in profit at Rs 6,021 crore. HCL Tech’s profits were at Rs 3,489 crore, registering a 7 per cent rise. Wipro’s net profit settled at Rs 2,659 crore, although the profit fell 9.3 per cent.
Does the quarterly variable pay reflect the profits?
As already mentioned, the quarterly variable pay is dependent on the company’s performance in the quarter. Despite that, most Indian IT companies scaled back on variable pay. TCS had given 100 per cent variable pay to all its employees in the last quarter, but this time around only 70 per cent employees would be getting 100 per cent variable pay.
Wipro promised variable pay to 85 per cent of its employees while Infosys denied to reveal any information about the same. When asked about variable pay during the earnings call, Salil Parekh, the chief executive officer of Infosys said, “So on variable, clearly, we will not share that number externally.”
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