TCS employees were said that the ?variable will not be paid for the fourth quarter of 2008-09?.
The variable pay ranges between 22 percent and 35 percent of an employee?s gross salary and is paid in two parts; half of it is paid every month along with the salary and the other half at the end of the quarter.
We received the monthly component of the variable pay along with our salaries. But after the company declared its fourth quarter results on April 20, we were told that we wouldn?t get the quarterly component of the variable pay,? said an employee.
TCS has over 126,000 employees on its rolls ? and the cuts will apply across all the business segments.
?A variable is a variable. It is not a 100 percent commitment,? a TCS spokesperson said over the phone from Mumbai.
The variable, which TCS pays after each quarter, is based on the performance of the company as well as the employee during the quarter, he said.
The spokesperson believed the cut was no big deal. ?There has been a cut of about three percent in an employee?s variable to be paid annually. Over 90 percent of the TCS employees have got over 95 percent of their variable for the financial year 2008-09,? he said.
Future worries
Employees are, however, worried that there?s no assurance that the cut will be restored in the next quarter, which ends on June 30.
?We have no idea about what will happen after the first quarter. We will get to know only after the company announces its first-quarter results for 2009-10,? said an employee.
The future doesn?t look too good. In the fourth quarter, the core business actually shrank 7 percent quarter-on-quarter if one leaves out the $71-million contribution of Citigroup?s captive BPO in India (now called TCS e-Serve) ? a point that chief operating officer N. Chandrasekaran admitted in a conference call with analysts on April 20.
The big worry is that existing clients in the US ?which have seen their revenues fall during the global downturn ? may step up pricing pressure, impacting TCS? revenues and margins in the next quarter.
?It is difficult to predict whether we will have volume growth (in the next few months),? CEO-designate Chandrasekaran had said during the interaction with analysts.
Tackling downturn
An internal letter circulated among TCS employees said the decision to trim the variable payouts was part of the company?s cost-saving measures that had been prompted by the need to tackle the effects of the global financial downturn and the comparatively poor performance in the January-March quarter.
TCS reported a seven percent year-on-year increase in net profit during the quarter at Rs 1,333 crore against Rs 1,245 crore in the year-ago period.
However, net profit fell 2.1 percent from the third quarter profits of Rs 1,362 crore.
On February 26, TCS chief executive and managing director S. Ramadorai said in Calcutta that the company was reviewing the payment of the employees? variable component.
He added that there would be no salary hikes in 2009-10. TCS had earlier restructured the variable component in the second quarter of 2008-09. ?The third quarter variable was paid in full,? an employee said.
Meanwhile, the company has also withdrawn the subsidised bus services it used to offer to its employees in Calcutta. ?The buses are still there. But the subsidy is gone. So, we are paying the full charges for the last few months,? employees said.
During 2008-09, the total employee costs at TCS rose to Rs 11,676.34 crore from Rs 9,413.05 crore in 2007-08.
?The increase is primarily attributed to the increase in headcount and increase in compensation package, particularly in India,? the annual report said.
?During 2008-09, the employees got a hike of 10-15 percent across all verticals,? the spokesperson said.
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