Until even a few years back, most IT services firms stuck to announcing hikes that kicked in starting April, but that was as long as the environment remained stable, deals flowed in, and growth soared. Since the 2020 Covid-19 pandemic, however, uncertainty around the timing of wage hikes has only deepened, leading to a slowing of revenue growth.
That has forced companies such as Infosys, Wipro, TCS, and Cognizant to adopt a diffused salary hike cycle with different companies having different times during a financial year to give wage increases to thousands of its employees. The typical April-March cycle has been thrown out of the window as companies manage margins from one quarter to the next. Company executives admit it is tough for employees but point out that this has now become the order of the day. For example, Cognizant – which follows a calendar year for reporting its earnings – pushed back its hike from March to August in 2024 and finally provided hikes for 2024 in November last year.
Wipro president and chief human resources officer Saurabh Govil concedes such delays and haphazard cycles impact employee morale significantly.
“It has become a reality given what is happening in the industry and the environment, all organisations have shifted the cycles depending on the business situation,” he recently told Business Standard. “It is a people intensive business and creates significant impact on the margins. These are a group of knowledge workers who understand that is happening in the organisation. In addition, there is the impact of artificial intelligence (AI), geopolitics, and economics. Of course the employees are disappointed but we have communicated to them transparently.
Wipro, India’s fourth largest IT services companies, has altered its cycles over the past few years and was supposed to provide salary hikes for FY25 around October last year. It finally provided the much-awaited hike in March this year. That means if it has to maintain its cycle, it will have to provide another round of pay hikes in a span of just six months at a time it has warned of slower growth this fiscal due to a worsening macroeconomic environment and client-related problems.
Similarly, Infosys rewarded its employees for FY25 between January and April of last year after stalling it for the year before. However, for FY 26, it has again broken the cycle and is yet to provide the hike or the timeline by when it will awarded. Chief Financial Officer Jayesh Sanghrajka said the company has not decided on the quantum or the timing of annual wage hikes. TCS, however, came back on track last month after delaying it for nearly six months last year.
The other big issue from an employee perspective is that the hikes now pale in comparison to what they used to be previously. Gone are the days of standard double digit hikes; they have been replaced by low-to-mid single digit hikes on average.
“The IT industry has provided good hikes over the years and the increase has been about 9-10 per cent. Given that reference, a 4-6 per cent does not even compare," said said Ram Sundararajan, chief people officer at HCL. "However, at HCL, we have been consistent with our hikes in October when 85 per cent of the employees were part of it. Also the decision to merge the quarterly variable pay with fixed pay for all the employees was received well,” he added.
Some companies, however, say normalisation will happen in the future. “When we do delay the hikes, we are open and transferring to the employees that we will work on it. But looking at hikes in isolation is a very incorrect measure. What will happen is you will see people that do want to do well in an organisation start being upwardly mobile. If you are playing the same role in the same job and you continue to expect an increment, it's difficult,” said Amit Chadha, chief executive officer and managing director of L&T Technology Services.
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