Tech MahindraBSE 0.69 % (TechM) has suspended the appraisal cycle for employees with more than six years of experience pending a management review, as the IT industry grapples with deep changes to the way it does business.
TechM made the announcement on Friday on a webinar chaired by its Chief Operating Officer L Ravichandran, three TechM employees told ET. The affected employees — who are typically team leaders and above — will have to wait at least two quarters before they are told if they should expect a wage increase. “We thought the wage increases would be very bad but we did not expect this. At least there are no large scale layoffs so far. That was also a worry,” a TechM employee who was on the webinar told ET.
Another employee said people were agitated about the move and that internal messaging groups were flooded with discussions about the announcement.
TechM confirmed the move but said the appraisals had not been postponed indefinitely and that the affected employees would be informed about their hikes after a management review. “This decision is not related to our performance in the third quarter. This was an item of discussion and once there is a management review, the employees will be informed,” a TechM spokesperson told ET.
TechM’s Q3 revenue grew over 4% sequentially to $1.12 billion. Profit rose 30.8% sequentially to $126.3 million. Other employees will get their compensation revision letter in March but their new salaries will only become effective in July.
Indian IT firms are beginning to take a second look at their existing cost structures as they focus on defending their margins against higher visa costs and clients who demand pricing cuts. One of the ways to accomplish this is to broaden the pyramid by having more fresh talent than experienced employees who cost more.
Analysts have said that TechM is increasing its fresher intake to manage its pyramid and boost its margin.
“Indian IT has a problem because their pyramid is more bulky than it was in the middle. You don’t want the freshers to leave because you have invested in their training but if you can create a situation in which more senior employees start looking to leave then it works in your favour,” an industry executive told ET. One of the middle level employees ET spoke to was of the view that job prospects were better for people with less than eight years experience.