MphasiS makes part of fixed pay variable

MphasiS, the information technology and business process outsourcing services provider, has lowered its fixed salary costs by deducting 5-20 per cent from the salaries of all its employees and then giving this back once every quarter as ‘variable pay’.

For junior and middle-level employees, MphasiS has converted about five per cent of their fixed income to variable. For some senior executives, it is as high as 20 per cent. The variable component is around five per cent for most staffers abroad.

MphasiS is understood to have introduced this scheme in the first quarter of its financial year, from November 2009. The company follows a November to October financial year pattern.

The Bangalore-headquartered company, a subsidiary of HP, decides the quantum of variable pay based on the performance of both the employee and the company.

On why MphasiS decided to do this, Ganesh Ayyar, CEO, said: “My cost structure has become variable. It’s not about taking money away from the employees — it’s about having a variable cost structure on the one hand from the company standpoint and enhancing the motivation factor of the employees, as they know if the company does well, they will get the immediate benefit.”

When asked how the employees had reacted to this new scheme, Ayyar said: “There is a bit of uncertainty about it. But that’s what the variable pay scheme is all about. The variable component was not there in employees’ salaries earlier. We just introduced it .. but when we introduced it, obviously there were some people who were not happy and there are reasons not to be happy. But they are seeing the positiveness of the scheme, as in the first quarter we paid more than what we deducted from the employees.”

During the time the global economic crisis was hitting the IT services sector in a big way, MphasiS had said it would convert some of its fixed costs into variable ones, to optimise the cost structure. “Now our primary focus is going to be in converting our fixed costs into variable, as much as we can. Because, when the times are uncertain, we want the cost variability to be higher than the usual. In this context, our focus is going to be, how do we ensure that our financials continue to stay healthy, despite the uncertainties,” Ayyar had earlier told this paper.

He said the company had not introduced the scheme for cash flow purposes, “because our cash flow is healthy anyway. Between the two quarters, we are giving 125 per cent variable pay to the employees, on an average,” he added.

In the second quarter ended April 31, MphasiS had seen higher attrition, in tune with the industry standard. The company said its staff attrition rate, which had reached 26 per cent at the beginning of the quarter, came down towards the end of the quarter.