Weak dollar causes pay cuts in IT firms

Bulging pockets, fancy cars, barbecue weekends and summer resorts were some of the luxuries an IT professional could enjoy. Or at least until now. The sunshine era of fat paycheques and heavy increments in the IT sector is now facing its lean time as top IT companies are taking steps to slash down the salary hikes of their employees in order to compensate for the diminishing value of the dollar.

A fall in the profit margin of certain companies has cut down the percentage of salary hikes to about seven to eight per cent compared to a previous 20 per cent in their variable pay.

Explains Jain Manish, Head of Corporate Communications, Perot Systems, “A fall in a company’s profit margin will automatically reflect on its payment system. The employees will face a reduction in what is called their ‘performance bonus’ or variable pay that is paid in accordance with the company’s performance.”

Sources from TCS, explain, “As most of our clients are American, transactions are done in dollars. The recent dip in the dollar value from Rs. 45 to Rs. 39 has affected our profits.” He adds that this calls for certain steps through which the companies can compensate for this loss. More than 70 per cent of the Indian companies have their clients in the US. Each employee is paid a premium advance based on the projected target of the company’s performance. Having failed to achieve the projected target, companies now address this issue by minimising the salary hikes.

Vinay Gupta, an employee from a top IT company, explains, “Our company gives us an increment every three months. The fact that they’re reducing this hike is quite alarming.” He adds that those on a lesser pay scale wouldn’t feel the pinch compared to those in the higher scale.  Manish says, “ The quick growth of IT aroused unrealistic expectations in companies on their profit. As a result, they increased their number of employees each year. But this fall will teach them to utilise their operations with limited manpower.”

He observes that IT companies have about 40 lakh employees and thousands more are recruited each year, which is also reflected in the diminishing quality of techies as students are recruited even from departments not related to IT (like civil and mechanical engineering).  According to the TCS official, “Companies will be more judicious this year in the selection processes which will minimise the circle of their needs and increase the focus on performance and quality.