TCS, Infosys, Wipro see rising salary costs amid slow revenue growth

Tata Consultancy Services (TCS), Infosys, and Wipro experienced a wage cost increase exceeding 5.5 per cent on average in the financial year 2023-24 (FY24) compared to the previous year, according to a report by The Economic Times. This rise occurred despite a slowdown in year-on-year revenue growth, which averaged 3.6 per cent.

The reason attributed to the cumulative salary cost surge of Rs 18,036 crore in FY24 is ongoing lateral hiring in high-demand sectors like artificial intelligence (AI), machine learning (ML), cloud, and engineering services, the report claimed.

This hiring, coupled with salary increments, albeit in the lower single digits, contributed to the higher wage base. The report noted that the after-effects of high attrition and increased demand during the Covid-19 pandemic continue to pose challenges for IT firms seeking to normalise their wage bills.

TCS, with a workforce exceeding 600,000 employees, witnessed a 9.5 per cent year-on-year increase in its wage bill, while Infosys and Wipro saw jumps of 5 per cent and 2.4 per cent, respectively. This contrasts with recent quarters where many companies have reported negative to flat growth.

While TCS and Wipro experienced a 50 basis points year-on-year improvement in their operating margins in FY24, Infosys saw a decrease of 40 basis points, with its margin settling at 20.7 per cent. Nonetheless, this remained within Infosys’ margin guidance range of 20-22 per cent for FY24 and FY25, the report added.

Salary hikes in TCS, Infosys, and Wipro
While TCS has announced salary increments ranging from 4.5 per cent to 7 per cent starting in April, with higher raises for top performers, Infosys and Wipro are yet to disclose their figures for appraisals and fresh hiring. Last fiscal, both Infosys and Wipro provided annual hikes to their employees, although the appraisal cycle was delayed by a few months.

Infosys has indicated that future hiring will be contingent on employee utilisation and adopting a flexible hiring model. On the other hand, Wipro is prioritising the completion of offers made to freshers during the pandemic, the report claimed.

High attrition rate in Indian IT industry
Attrition rates for TCS, Infosys, and Wipro at the end of FY24’s fourth quarter decreased to 12.5 per cent, 12.6 per cent, and 14.2 per cent, respectively, from levels of 20.1 per cent, 20.9 per cent, and 19.4 per cent a year earlier, ET reported.

The three companies, which are among India’s top five IT firms, have recently disclosed their fourth-quarter and annual revenues. Despite this, they collectively experienced a record drop in headcount of approximately 64,000 for FY24.

Decreasing employee count in IT firms
In FY24, TCS witnessed a decrease in headcount by 13,249 employees (2.1 per cent), yet its employee benefit expenses surged by 9.2 per cent to Rs 1,40,131 crore from Rs 1,27,522 crore in FY23.

Infosys ended FY24 with 25,994 fewer employees, a decline of 7.5 per cent to 317,240. However, this reduction did not lead to a decrease in its wage cost; instead, Infosys’ employee benefit expenses rose by 5.4 per cent to Rs 82,620 crore in FY24 from Rs 78,359 crore in FY23.
Wipro concluded FY24 with 234,054 employees, a decrease of 24,516 from the previous year. Consequently, the company’s employee benefit expenses in FY24 rose by 2.1 per cent compared to the previous year, reaching Rs 54,930 crore, according to the report. Business Standard