Cognizant cancels mid-year hikes, promotions

Cognizant Technology Solutions beat rivals by a mile in the September quarter, and seems to be in the running to overtake Tata Consultancy Services as India’s software leader in the next quarter.

But that doesn’t mean things are hunky dory at its India operations.

According to an email sent to employees, Cognizant has decided to call off its mid-term appraisals which were due this quarter.

“Cognizant gave out its annual promotions and wage hikes in the second and third quarters of calendar 2012 for its associates in India. A few weeks back, we evaluated the feasibility of a second promotion cycle for our employees up to a certain level based on company performance and market conditions, but have decided not to have a second cycle this year,” a company spokesperson told DNA.

Last November, employees were assured of 100% variable payout in stock options in case it was able to grow topline by 23% instead of the forecast 20% guidance in 2012.

But since guidance was down, variable payout was also hit.

Sources suggest Coognizant may also go in for selective layoffs.

Sashi Bhushan, IT analyst at brokerage Prabhudhas Lilladher, said all IT firms which have set ambitious targets are now revising the numbers. “Even Nasscom said IT companies would meet only the lower end of its guidance at 11% for the year.”

Human resource experts suggest this trend is being followed across sectors in an effort to protect margins and cut costs.

“The financial services sector, which contributes the maximum to most Indian IT firms’ revenues, are not obliged to give out wage hikes any more, looking at the prevailing environment,” said Yogesh Saigal, independent HR consultant.

“However, since most IT firms are postponing their hiring, companies such as Cognizant can get away without giving appraisals – at least until hiring in the sector picks up again. This is currently an employers’ market – not an employees’ market,” said Saigal.

In March, Cognizant had proffered 200% variable payouts to top performers, while the average bonus was 150%. (Typically, anywhere from 20 to 30% of an employee’s salary is labelled as variable pay, linked to a combination of overall company performance and individual performance.) This was because of a growth of 33% in calendar 2011 compared with a guidance of 26% for the year.

Although Cognizant only needs to grow by 2.6% in the next quarter to meet its target of 20% for the year, it has predicted a slower fourth quarter and second-half of 2013 – much unlike peers.