BENGALURU: The timing of salary increases within many IT companies has shifted from the traditional April-June period to the third quarter of the year, introducing a level of uncertainty as the process is now influenced by the demand outlook.
Salary increases have become more unpredictable in recent years, with the frequency and timing of these raises varying significantly across industries and companies.The duration of time between wage hikes has also become less consistent, making it challenging for employees to anticipate when they might receive their next pay bump.
Ravi Kumar, upon assuming the role of Cognizant CEO last year, implemented a one-time additional salary increase in April, just six months after the company’s standard cycle. This measure was taken to address the high attrition rates experienced by Cognizant, which had previously provided a hike in Oct 2022. In the earnings press conference for the Sept quarter, CFO Jatin Dalal said that with the scope to improve utilisation and as attrition has fallen to desirable levels, the time of multiple hikes is over. Consequently, Cognizant implemented the annual pay increase in Aug this year.
HCLTech also said in Aug this year that a firm decision had not been taken on salary increments this year after deferring the hike for some employees. Wipro, in the past, has rolled out raises in a staggered manner between April and Sept. Ray Wang, CEO of Constellation Research, said that sometimes, CFOs at the services firms do not have firm guidance on what the next four quarters will look like. All IT services firms – Indian as well as multinationals – have not hinted at a full recovery. They are still talking about green shoots in select areas but maintain that discretionary spending is yet to recover fully. Appraisals are being held back as both a risk mitigation measure and a cost saving one. “The job market is loosening in the US, so employers have a little more leverage. However, in India, the job market is still tight, and GCCs are attracting talent due to these appraisal delays,” Wang told TOI.
Brokerage firm Motilal Oswal Financial Services, in its pre-earnings report, said that margins for companies that defer wage hikes to the second half of the financial year will see an uptick in the Sept quarter. Margin pressures will show up in the second half for firms like HCLTech that haven’t rolled out the annual hike this year. Earlier, IT services firms would roll out their hikes and promotions at the beginning of the financial year. The delay in the hike this year, as well as the previous year, is a testimony to the sluggish demand environment for the IT services industry.
Sunil C, India country head at HR solutions firm Adecco, said that IT services companies often focus on short-term project outcomes rather than long-term gratification, leading to a skewed emphasis on immediate impact. “This is especially true for high-demand niche skills and digital skills, where short-term performance metrics dominate the appraisal process. As a result, 8-12% of existing employees receive off-cycle hikes, while 30-40% remain stagnant without any salary adjustments. These factors collectively contribute to the current trends in wage hikes and promotions.”
