Hurt by a subdued demand environment, Cognizant has delayed salary hikes for employees by three months. While annual increments are typically given July, these will now be handed out in October. The Chennai-based IT major added just 1,000 employees in the January-March quarter; that’s about a fourth the number of net hires added in previous quarters. Promotions will be delayed as well. An email by Cognizant chief people officer Jim Lennox said those employees up to the level of vice-president may have to wait till October to see any promotions, if any. The company has a total employee strength of 2,61,200.
Cognizant’s net profit in 2016 fell 4.3 per cent to $1.55 billion, even as the BFSI and healthcare verticals slowed down. The company’s revenue guidance for 2017 indicates it will only grow at 8-10 per cent, or the same pace as it did last year.
However, Cognizant is hoping to be more profitable and is targeting an operating profit margin of 22 per cent in 2019, up from the current level of 18.9 per cent. With the $150-billion Indian IT industry staring at single-digit growth, even as automation eats away low-end jobs, other players too might be compelled to defer pay hikes, say analysts. The Nasdaq-listed Cognizant has decided to pay its senior managers a lump-sum amount in October instead of monthly increases. Manager-level employees and below have been promised a hike similar to last year, which was in high single digits.
Lennox’s email said, “Year 2017 has seen a good start and while macro environment factors cannot be controlled, what can be controlled are their executions against macro shifts, driving value to clients and differentiating themselves in the marketplace.” The company has also indicated that it has reduced the variable payout of the employees in the range of 95 per cent, 75 per cent and 50 per cent for 2017, depending on their category.