Why are IT giants Infosys, Wipro, & TCS scaling back variable payouts?

Why are IT giants Infosys, Wipro, & TCS scaling back variable payouts?

Information technology giant Infosys has reportedly cut its average variable payout to 70% for the June quarter.

IT companies such as Infosys are not the only ones cutting employee variable compensation. Tata Consultancy Services (TCS) and Wipro recently announced they are delaying, postponing, or reducing employee variable payouts for the first quarter of the fiscal year 2023.

The crunch at India's major IT companies: what's behind it?

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The concept of variable payout, better known as performance pay, relates to compensation given to employees for contributions beyond their normal tasks. Essentially, it is based on employee performance and company performance.

The squeeze in margins for the June quarter has forced many IT giants to reduce variable payouts.

The squeeze in margins for the June quarter has forced many IT giants to reduce variable payouts.

Despite rising costs, Infosys posted a lower-than-expected 3.2% rise in net profit in the first quarter of the financial year 2023.

Despite rising costs, Infosys posted a lower-than-expected 3.2% rise in net profit in the first quarter of the financial year 2023.

The overall costs for Infosys in this quarter were higher because of a dramatic increase in employee benefit expenses, subcontracting expenses, and travel expenses.

Although the company maintained its margin guidance of 21-23%, it clarified that the company would be at the lower end of its margin outlook due to cost increases. For the June quarter, the IT major's operating margins were 20%.

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