Tech firms will focus on sustainable cost structures: TeamLease Services

“There are corrections being made now and business performance is a big rider. The signal is sent out that companies will focus on building sustainable cost structures,” said Rituparna Chakraborty, co-founder and executive director of TeamLease Services.

Chakraborty’s comments follow tech companies bringing in changes in salary and variable pay structures to cope with margin pressures.

Recently Tata Consultancy Services (TCS) stopped its first-year anniversary hikes, underscoring efforts by India’s booming technology sector to arrest high staff costs. While rivals such as Infosys are rolling out 70% of variable pay, Wipro has delayed payouts for certain employee categories.

In IT services firms, manpower makes up 70% of the costs. TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra have seen their employee expenses shoot up as high attrition continued to plague them in the June-ended quarter. On average, wage costs as a share of revenue rose from 54.3% in the March-ended quarter to 55.2% in the June quarter. The hiring frenzy of the last four quarters, multiple counters, higher than usual increments, out-of-turn promotions were acceptable until now.

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