“We will move forward with compensation reviews for employees in E0 to E3 bands. The effective date for increases will be retroactive to Oct 1, 2023 for E0 – E2 and effective Jan 1, 2024 for E3,” the company’s chief people officer Ramachandran Surdararajan said in a communication to all employees. The formal communication email has been reviewed by ET.
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The classification of E0 – E2 employees range from freshers to technical leaders and E3 – E6 employee band are those with mid-level positions ranging starting from project managers up to vice presidents. E7 and above are the senior-level employees.
Also read | HCLTech trims full-year outlook on demand drop
After deferring the wage hikes by a quarter, starting October, HCLTech will kick start the appraisal cycle for FY24.
“As announced after our Q1 results, we made the difficult decision to skip the compensation review cycle for E4 and above bands in this fiscal year, and that decision will remain for now,” the email read.
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The salary increases which usually happen in July for HCL Tech, will now take effect from October.The New Delhi-based software exporter also said it will continue with its decision to skip the compensation review cycle for E4 and above band of employees in this fiscal year.
E4 starts with middle level employees of group projects managers and senior level employees above.
HCLTech is also set to simplify and align its first-year compensation review cycle to the annual cycle across employees in three categories.
Also read | HCLTech expects Q3, Q4 growth to lead industry numbers: CEO C Vijayakumar
This will essentially allow new laterally hired employees from April 2023 to enter the compensation cycle within six months of joining the organisation without waiting for a year.
The new cycle will be applicable across three different categories of employee bands starting July for entry-level employees, followed by October for mid-level workforce. The senior-most employees will be reviewed only from January.
“Going forward, the first year compensation review will now be aligned to the annual compensation review cycle effective July (for E0 – E2 employees); October (for E3 – E6 employees); and January (for E7 & above employees),” the communication further said.
However, this new alignment will only apply to the lateral hirings made by HCLTech. Professionals who have joined via the firm’s TechBee and Campus Hire routes will continue to align to their published review schedules, which are typically starting July, October and January as mentioned above.
In June this year, ET reported that HCLTech updated its performance bonus policy from 100% engagement performance bonus (EPB) to variable pay format effective from April for junior level employees in the E0-E3 band.
This had not gone well with some sections of HCLTech’s employees, such as those represented by Nascent Information Technology Employees Senate (NITES), which raised concerns that the previous policy assured employees that the EPB would be paid at a fixed rate monthly, even if employees were on the bench.
HCLTech did not respond to ET’s queries on the alignment and wage hikes.
During the second quarter earnings conference call on October 12, Surdararajan said that the company took two decisions last quarter. “One, we said our middle managers and senior managers (E4 and above) will skip the pay revision cycle this year. That decision stays. The second decision that we took is for the rest of our colleagues (E0 to E3), we will review it in this quarter, which is a decision that we have taken, that we will go ahead with the pay revision, and that’s effectively covering 90% of our employees.”
In terms of the overall compensation package, he added that the quarterly variable pay is 3% of the annual compensation of the individual. “It is not a big portion. So, this quarter we will continue with our quarterly variable pay. So, all our colleagues will get their quarterly variable pay this quarter. Majority of them should see their quarterly variable pay to be upwards of 85%.”
The new move by HCLTech comes at a time when the IT industry is facing its slowest growth ever owing to a freeze in discretionary spending by its clients amid a macroeconomic slowdown and recession concerns. The global environment has only worsened due to the West Asia conflict further fanned by the ongoing Israel-Hamas war.
Meanwhile, HCLTech reported relatively better financial numbers for the July to September quarter, posting a 10% growth in its consolidated net profit at Rs 3,832 crore for the quarter ended September. Its revenue from operations during the period rose 8% to Rs 26,672 crore as against Rs 24,686 crore in the same period last year. However, in constant currency terms, revenue was up marginally 1% from the preceding quarter and 3% on a yearly basis.
In an interview after the financial results, chief executive officer C Vijayakumar told ET that expects growth to lead the industry numbers by a “big margin” in the third and fourth quarters.
“In the financial year results, TCS, Infosys, and HCL Tech are strategically pivoting towards aggressive cost rationalization, demonstrating remarkable margin improvements. The unexpected positive margin performance reflects their proactive measures, such as elevating utilisation rates, enhancing productivity, and reducing the average cost of resources. This suggests that these companies have the potential to expand margins by 60-110 basis points over the medium term, showcasing their adaptability and resilience in response to evolving market dynamics,” said Sumit Pokharna, vice president and analyst at Kotak Securities.