Why has Infosys deferred salary hikes?

Infosys has deferred its salary hikes.

The development comes months after the company, India’s second-largest IT services exporter, registered a nearly five per cent increase in its net profit in the second quarter of 2024.

The firm last gave employees a pay hike in November 2023.

But what happened? What is behind this decision?

Let’s take a closer look:

What happened?

According to a report in Moneycontrol, Infosys has said it will give its employees a salary hike in the fourth quarter of 2025.

Salary increments are usually given earlier in the year.

The company in October had claimed it was “planning” wage hikes in Q4 in a phased manner.

“Some part of that will be effective in January and the balance will be effective in April,” chief financial officer Jayesh Sanghrajka has said.

The company had said its consolidated net profit of Rs 6,506 crore in the July-September period – the second quarter of the 2024-25 fiscal year – was 4.7 per cent higher than the same period last year.

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The figure was 2.2 per cent higher than the net profit in the preceding quarter.

India Today quoted analysts from Motilal Oswal Financial Services as saying it anticipated margin pressures in the December quarter because of seasonal furloughs and fewer working days.

However, it said increase in prices, subcontractor optimisation and Project Maximus ( Infosys ’ margin improvement plan) would help combat these issues.

Infosys , after six consecutive quarters of drop in employee strength, had added about 2,500 employees on a net basis in the September quarter.

Infosys isn’t alone.

HCLTech, LTIMindtree, and L&T Tech Services have also delayed salary increments in the name of costs and profitability, as per Moneycontrol**.**

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“We had deferred pay revision by a quarter. We will now be going ahead with pay revision this quarter, from October onwards. Mid- and senior-management won’t take pay hikes in FY24. But for 90% of our employees, we will go ahead with pay revision,” HCLTech’s chief people officer Ramachandran Sundararajan had said in 2023, as per CNBC.

The outlet quoted LTIMindtree CEO and MD Debashis Chatterjee as saying it would give out its increments in the October-December quarter in FY-25.

The firm had previously delayed its salary hikes in FY-24.

While some employees received increments as low as 1 to 2 per cent, others got no salary hikes at all.

Why is this happening?

The development reveals that the IT firms are facing uncertainty when it comes to demand across the world – especially when it comes to spending on discretionary IT services.

IT firms are also examining macroeconomic concerns and clients postponing their spending, as per Moneycontrol.

Experts told Moneycontrol that the delay is not likely to result in a flood of employees heading for the exits.

Given the stagnant job market, retaining a job itself feels like a bonus in the current climate, they added.

Mint in January reported that TCS, Infosys and HCL Technologies are likely to respectively witness constant currency revenue growth of 0.4 per cent, 1.0 per cent and 3.7 per cent on a sequential basis.

Infosys said it expects constant currency revenue growth between 3.75 per cent and 4.5 per cent for the financial year April 2024 to March 2025, higher than its earlier guidance of 3 per cent to 4 per cent.

Infosys CEO and MD Salil Parekh termed it a “huge upward movement” in growth guidance. The upward revision comes on the back of a ramp-up of mega deals.

With inputs from agencies