HCLTech, one of the leading IT services companies, has made the decision to skip compensation reviews for senior management level employees in fiscal year 2024. This move comes as the company faces a challenging business environment and recently reported weak performance in the June quarter. During the company’s earnings conference, CEO and MD C Vijayakumar stated that the compensation review for the management layer, E4+ level, will be skipped, and reviews for junior to mid-level employees, E3 and below, will be deferred by a quarter.
CFO Prateek Aggarwal highlighted that the E4+ layer, which includes senior staff, constitutes a significant portion of the company’s wage bill. Additionally, Chief People Officer Ramachandran Sundararajan explained that the decision to defer annual reviews for junior to mid-level staff was influenced by recent hiring and compensation reviews.
HCLTech reported disappointing results for Q1FY24, falling short of analyst estimates. One of the key metrics that missed expectations was the EBIT margin, which declined to 16.9 percent in Q1 compared to 18.2 percent in the previous quarter. Aggarwal attributed a significant portion of the margin decline to lower utilization rates.
The company also experienced a decline of 2,506 employees in its total headcount for Q1 and chose not to fill attrition vacancies. CEO C Vijayakumar emphasized that improving utilization rates would be crucial for enhancing operating margins and achieving the company’s goal of an 18-19 percent margin by the end of FY24.
Not only HCLTech but also its peers Infosys and Wipro have delayed pay hikes. Wipro has deferred its wage hike cycle until the third quarter or December quarter, unlike the previous fiscal year when hikes were implemented in the September quarter. Wipro also announced that junior-level employees would receive only 80 percent of the variable pay in Q1, based on the company’s overall performance.
Infosys has also deferred pay hikes, typically rolled out in April for employees below senior management and in July for senior management. Employees in these segments have not received any communication from the company regarding these delays.
In contrast, Tata Consultancy Services (TCS) has already initiated its promotion cycle and offered 12-15 percent hikes to exceptional performers effective from April 1. However, TCS has postponed onboarding over 200 lateral hires with two to 15 years of experience until October, citing uncertainties and project delays.
