Slowdown-hit IT firms trim CXO level pays

Tightening The Purse Strings

- Infosys & Wipro reduced variable pay for Q4 of FY23

- Sr managers’ biggest component of salary is performance-based

- Sluggish Q4, subdued performance of stocks the reasons

Bengaluru: Compensation of senior management including the Chief Executive Officers (CEOs) of Indian IT firms is likely to be adversely affected in the current financial year as performances of most large and many tier-II IT companies are expected to worsen as compared to last fiscal.

At a time, IT majors Infosys and Wipro have reduced the variable pay out of their employees, citing performance of companies. It’ll also be a factor that will be considered in pay out to people in the senior management roles. The biggest component of salary of CXO-level employees such as CEO, CFO (chief financial officers), CTO (chief technology officer), CHRO (Chief Human Resources Officer) is drawn from performance of company that includes its share price.

“It’s not only the variable pay out of employees that has been reduced, even salaries of senior management will also see a downward trend given the revenue growth projections for this fiscal,” said a source working in the HR industry.

IT firm Infosys last week reduced the average variable payout across the organisational level to 60 per cent for the fourth quarter of FY23.

“While FY23 was a year of strong performance overall, the quarter that went by was impacted by a volatile market and unforeseen events. As we remain vigilant to the changes in the market, we must also see this as an opportunity to rally as a group and remain committed to navigating the changing business landscape,” Infosys said in a communication to its employees. The company has guided for 4-7 per cent revenue growth in the current financial year.

Similarly, Wipro rolled out a variable pay out of around 80 per cent for its employees during the fourth quarter.

“Given our overall performance across Wipro and with the company multiplier at 1, the variable pay for Q4 FY 2023 is 80.25 per cent for employees whose payout is linked to Wipro’s overall financial performance,” the company informed employees.

As IT firms flagged up performance in the fourth quarter and challenging business environment in FY24 as the main reasons for reduced variable payout, senior management also has to face the same.

Usually, more than 70 per cent of the total salary of senior management is linked to performance of the company. For instance, Salil Parekh’s FY23 salary of close to Rs80 crore has a fixed compensation component of only Rs11 crore with the rest is linked to performance-based rewards in the form of cash and stocks.

Therefore, the payout for FY24 of senior management is expected to be adversely impacted owing to worsening business environment coupled with subdued performance of stocks so far in Indian exchanges.