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Cognizant may hike variable pay component in move to lower costs: Report

Discussions around the change in compensation have just begun

BS Web Team  |  New Delhi 


Cognizant, the Teaneck, New Jersey-headquartered software services major, may increase the variable pay component in its employees' compensation structure, the Economic Times reported on Tuesday, citing sources in the know. The move is being mooted as the IT services firm moves to cut costs and possibly shore up margins, added the report.

The company is restructuring itself under the new CEO, Brian Humphries, said the report. This includes reducing the management layers and rethinking its sales and business strategy. Further, according to the report, reworking the compensation structure is another measure in a roadmap aimed at making the company 'fit-for-growth'. Earlier, Humphries had said that changes to compensation were being considered, added the report.

A source with knowledge of the deliberations told the financial daily that at present, the variable pay was a smaller component of compensation. However, the idea is to increase the variable pay to actually reward growth and contribution. "It could be 35 per cent or more in mid-levels, but it won't be significantly higher for freshers, who are on a low base," added the source.

The financial daily reported that a spokesperson said, "Aligning compensation to key strategic focus areas like digital is a critical enabler for us and this is a process we are being very deliberate about and spending significant time and effort working on."

On August 2, despite posting largely in-line second-quarter numbers, the IT services major further revised its revenue growth downwards for the whole year as the company continues to pursue cost optimisation measures.

As reported earlier, for the whole year, guided for a revenue growth in the range of 3.9-4.9 per cent in constant currency terms, which was lower than its previous guidance of 3.6-5.1 per cent issued in May.

According to the report, for the second quarter ended June 30, the company posted a growth of 11.6 per cent in its net profit to $509 million, as compared to the corresponding period in the previous year. The revenue, at $4.14 billion, grew 3.4 per cent year-on-year, while in constant currency terms, the growth rate was 4.7 per cent.

The report added that the company had said that it was planning to hire more than 500 customer-facing and sales support professionals, who would help the company expand existing accounts and generate new ones in the coming quarters.

First Published: Tue, August 06 2019. 11:10 IST