Pune-based engineering services firm KPIT Technologies received a notice from the Labour Commission for effecting a pay cut for all its employees in India. The salary cuts which are said to be in the range of 10-50 per cent, will be in force till September this year.
The Labour Commission order, signed by Assistant Labour Commissioner Nikhil Walke, asked the company to follow Maharashtra state directives and refrain from pay cuts or layoffs, or face strict action. The order a copy of which was also reviewed by Business Standard, has also asked the company to submit a report on the appropriate action taken after following the government guidelines.
KPIT Technologies acknowledged the receipt of the mail containing Business Standard's detailed questionnaire on the issue on Thursday, though it remained unanswered till the time of going to press.
However, in an internal mail circulated to the employees, KPIT Technologies' co-founder, managing director and CEO Kishor Patil has said that the pandemic has impacted clients' businesses globally and consequently there is a sudden impact on the company's operations revenue and cash collection.
"Starting from April 2020, salary will be temporarily reduced, and will extend at least till September 2020," the mail said. The chairman will not draw any compensation during the period while the pay cuts for other full-time employees ranged from 10-50 per cent.
The compensation change will be implemented by first reducing the variable pay and special allowances and will be extended to the fixed component if it extends beyond the variable pay component, it said. Business Standard has reviewed a copy of the official mail.
The company which boasts of clients such BMW, Cummins, Denso, Hitachi and Honda among others, employs around 5,500 people.
The labour department's order was in response to a complaint filed by union National Infomation Technology Employees Senates (NITES) against the salary cuts undertaken by the firm. "Moreover, they have forced more than 200 employees to go on part-time work and their salaries are further reduced by 50 per cent," said Harpreet Saluja, general secretary, NITES. "Also, we have very high hopes from the Supreme Court of India as our public interest litigation (PIL) for illegal layoffs and salary cuts by IT, ITsS, BPO and KPO companies is scheduled to be heard on 15 May 2020.”
Last week, the Labour Department also served notice to another city-based company Tech Mahindra, for suspending shift allowance of employees.
Owing to slowing revenue growth and uncertain demand environment, IT service providers such as Tata Consultancy Services, Wipro, Infosys and Tech Mahindra have paused salary hikes and undertaken an aggressive cost optimization strategies.