Mid-size IT companies to ring in pay hikes

BANGALORE: After software giant Wipro lifted freeze on promotions and hikes, although selectively, mid-sized technology firms like MphasiS-EDS, Sonata Software and Symphony Services are also planning to increase salaries and give bonus.

IT services firm MphasiS, which recently bagged new outsourcing contracts, has announced a recompense bonus for its staff which the company feels is possibly an innovative compensation model. “For good performers, the bonus can be 15-25% higher than the average pay hike,” MphasiS chief human resources officer Elango R said.

Recompense bonus will compensate for the salary freeze which was introduced in early 2009. “It is a one-time adjustment in the form of a bonus to reward employees for their commitment and contribution,” said Mr Elango.

The recompense bonus is guaranteed up to the third quarter and is linked to the company’s overall performance and that of the business units as well as to the performance of employees, which includes the individual appraisal rating, for the fiscal year ending 2009.

“If in the fourth quarter, the company achieves its targets again, the bonus size will get bigger. In case they do not meet targets, the bonus will still be paid out on a pro-rata basis based on the third quarter results,” Mr Elango pointed out. He said this bonus was possible not only by winning new businesses, but also through
operational efficiencies.

Offshore product firm Symphony Services is planning to hike salaries for all its employees by 7-8% once its budget is ready. “We are noticing that other companies are also contemplating hikes of 5-8%. However, companies are keeping a watch on the overall market,” C Mahalingam, executive vice-president and chief people officer of Symphony Services, said.

Like MphasiS, Sonata Software, too, has introduced a new package called ‘company-linked performance pay’. Last year, the firm had dropped annual incentives and appraisals due to the economic meltdown. “But this year, there will be appraisals, salary increments between 7-10% and incentives based on performance because the market is getting better and Sonata is getting projects from the UAE, the US and the UK,” said a person privy to the developments.

These changes come at a time when layoffs and salary cuts have become a rather controversial method to control cost. Experts like Ashok Reddy, managing partner and co-founder of staffing company, Teamlease, said business is picking up and companies are increasing salaries based on employee performance, revenue and profit rise. “Many companies are restructuring pay scales or cost-to-company compensations. And attrition rate will also grow as more jobs are coming in,” said Mr Reddy.

Going forward, mid-sized companies will explore more innovative compensation models that will be based more on performance, experts said. To boot, apart from the bonus plan, MphasiS has announced a quarterly performance-linked pay model for FY10. “Effective November, a percentage of annual fixed and base salary will be converted to variable which will be paid based on quarterly performance of the company and the business unit,” Mr Elango said.