India's IT Sector Giant Wipro Holds Back Employees' Variable Payouts As Operating Margin Drops

India¡¯s fourth largest IT services provider by revenue, Wipro, has decided to hold back variable pay to its mid- and senior-level executives for the April-June quarter. This is due to pressure on operating margins, according to people aware of the matter, as per ET,

Wipro reportedly said in an email earlier this week that employees belonging to C bands and above (managers to C-suite level) will not receive any variable payouts, while associates in A and B bands (freshers to team leader levels) will receive 70% of the target variable pay for the quarter subject to a billability threshold.

¡°We've seen some continued pressure on operating margins. Our Q1 margins were lower at 15% due to inefficiency in our talent supply chain, project margins and our investments in talent, technology and solutions during the quarter¡­ Given our under-performance on margins this quarter, our variable pay (including sales incentives) takes a hit,¡± according to the email by the IT sector giant.

Incentives for employees in its sales teams have also reportedly taken a hit. Variable payout for executives in C band and above is based on three metrics, revenue, order book and margins.

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¡°There is no change to our earlier statement on salary increase, and hikes for our employees will be effective from September 1. We have also completed the first cycle of quarterly progressions effective July 1. We have no further comments on the quantum of variable pay,¡± Wipro responded to ET.

The quarterly variable pay, which is usually paid the following month after the three-month period, was already due last month in July. Wipro¡¯s employees in the A and B bands will receive the reduced pay along with their salary for August.

Also Read: HCL CEO Overtakes Wipro CEO As Highest Paid IT Sector CEO In India

Drop In Operating Margins

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Wipro reported a 200-basis-point sequential drop in operating margins for the fiscal first quarter (April-June 2022), at 15% on account of wage hikes and currency-related headwinds.

The metric stood at 17% last quarter and 18.8% in the same period last year, as per the report.

Wipro¡¯s management reportedly said that the company's acquisitions affected margins by 20 basis points, 40 basis points from travel and variable costs and 1.3 percentage points from talent costs.

Wipro¡¯s operating margin was the lowest compared to Tata Consultancy Services, Infosys and HCL Technologies, the ET report mentioned.

Overall, the IT industry has also been dealing with unprecedented levels of attrition in the past two years or so. Wipro has, however, kept attrition rates lower than peers, with the April-June level down to 23.3% from 23.8% in the sequential period.

Also Read: Reliance Jio, Airtel & Vodafone Idea Giving Higher Salary Hikes

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