Infosys likely to slash variable pay

Anticipating weakening demand from the US market, coupled with pricing and margin pressures in the fourth quarter of the current financial year, Infosys Technologies will look at slashing variable pay-out to its employees.

"Infosys has a variable pay structure that has been created to link individual employee compensation to the company’s performance. This variable pay structure is dependent on company, unit and individual performance," an Infosys spokesperson said, adding that depending on the variable component, employees can either benefit if the performance of the company exceeds targets or could get impacted if the performance is below expectations.

Infosys raised its rupee revenue forecast for FY09 but lowered its dollar revenue guidance for the second time this financial year. For the first time, India's second-largest IT services provider witnessed its sequential dollar revenues fall 3.7 per cent. Moreover, while 30 new clients were added by Infosys and its subsidiaries during the quarter, the total number of clients fell to 583 from 586 in the quarter ended September of FY09.

The weak marketing conditions have already affected pricing and employee utilisation at Infosys, with new projects slowing down and scaling down of some existing projects. Though the impact on Infosys' cash flows has been limited, according to Standard & Poor's. The company is clearly anticipating further pressures from pricing and foreign exchange fluctuations in the fourth quarter. The Bangalore-based IT major has also made it clear that it expects tougher negotiations from clients and delays in new orders till mid-February.

"Indian IT giants like TCS, Wipro and Infosys have carried out geographical diversification to reduce their dependence on the US market. But the global slowdown and challenging market conditions have largely nullified the benefits of geographical diversification," an industry source said, adding that the company's strong global delivery model and experienced management would be key factors to bank on in a deteriorating operating environment.

The company finished 2008 with 103,000 employees on its rolls, and expects to employ over 106,000 people by the end current financial year. While a cap has been placed on recruitments of freshers till March 31 this year, Infosys has reiterated that it will honour all offers made to freshers till December last year.