Agencies has decided to hold back variable payouts to its mid- and senior-level executives for the June-ended quarter due to pressure on operating margin, according to people aware of the matter.
The country’s fourth largest IT services provider said in an email earlier this week that employees belonging to C bands and above (managers to C-suite level) will not receive any variable payouts while associates in A & B Bands (freshers to team leader levels) will receive 70% of target variable pay for the quarter subject to billiability threshold. ET has reviewed the email. Wipro did not immediately respond to ET’s queries.
"We've seen some continued pressure on operating margins. Our Q1 margins were lower at 15% due to inefficiency in our talent supply chain, project margins and our investments in talent, technology and solutions during the quarter… Given our underperformance on margins this quarter, our variable pay (including sales incentives) takes a hit," the email said.
The quarterly variable pay, which is usually paid the following month after a quarter by the Bengaluru-based firm, was already due in July. The A & B Bands will receive the reduced pay along with August’s salary. Sales incentives for employees in the sales teams have also taken a hit. The variable pay is based on three metrics–revenue, order book and margins– to the employees.
Wipro reported a 200 basis point sequential drop in operating margin for the April-June quarter, which stood 15% on account of wage hikes and currency-related headwinds. The metric stood at 17% last quarter and 18.8% for the same quarter last year. The management said that the company's acquisitions led margins to decline by 20 basis points, 40 basis points from travel and variable costs and 1.3 percentage points impact from talent costs.
“We had mentioned at the beginning of last quarter that our margins will remain lower as we are making conscious investment in our business. And this is going to be there for a few quarters,” said Jatin Dalal, chief financial officer. He added that the margins will improve from this point as it has bottomed out.
The country’s fourth largest IT services provider said in an email earlier this week that employees belonging to C bands and above (managers to C-suite level) will not receive any variable payouts while associates in A & B Bands (freshers to team leader levels) will receive 70% of target variable pay for the quarter subject to billiability threshold. ET has reviewed the email. Wipro did not immediately respond to ET’s queries.
"We've seen some continued pressure on operating margins. Our Q1 margins were lower at 15% due to inefficiency in our talent supply chain, project margins and our investments in talent, technology and solutions during the quarter… Given our underperformance on margins this quarter, our variable pay (including sales incentives) takes a hit," the email said.
The quarterly variable pay, which is usually paid the following month after a quarter by the Bengaluru-based firm, was already due in July. The A & B Bands will receive the reduced pay along with August’s salary. Sales incentives for employees in the sales teams have also taken a hit. The variable pay is based on three metrics–revenue, order book and margins– to the employees.
Wipro reported a 200 basis point sequential drop in operating margin for the April-June quarter, which stood 15% on account of wage hikes and currency-related headwinds. The metric stood at 17% last quarter and 18.8% for the same quarter last year. The management said that the company's acquisitions led margins to decline by 20 basis points, 40 basis points from travel and variable costs and 1.3 percentage points impact from talent costs.
“We had mentioned at the beginning of last quarter that our margins will remain lower as we are making conscious investment in our business. And this is going to be there for a few quarters,” said Jatin Dalal, chief financial officer. He added that the margins will improve from this point as it has bottomed out.
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