New Delhi: IT giant Infosys has scaled back the average variable payout of employees to about 70% for the June quarter. High employee costs and margin squeeze are said to be the reasons.
Employees of the firm have been informed of the decision via email.
Last month, Infosys reported a lower-than-estimated 3.2% rise in June quarter net profit. Higher employee benefit expenses, subcontracting costs, and travel expenses are said to have pushed the overall costs.
On the other hand, its full-year revenue growth outlook was raised to 14-16% citing strong demand and a robust deal pipeline. Margin guidance of 21-23% was maintained.
Infosys' operating margins were at about 20% in Q1 FY23.
Infosys' Chief Financial Officer, Nilanjan Roy, said the company is fuelling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. "While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth," he said in an official statement.
Infosys earlier claimed that it continues to optimise various cost levers to drive efficiency in operations. However, compensation hikes impacted margins by 160 basis points. The entry of new freshers caused utilisation to dip. The company will be looking at cost optimising levers such as better utilisation, and more automation.
The Indian IT industry has been experiencing a dent in profitability due to higher employee costs. Wipro also recently held back the variable pay of employees due to pressure on margins, inefficiency in its talent supply chain, and investment in technology. Tata Consultancy Services has allegedly delayed quarterly variable compensation payout for some employees by a month.