TCS staff to lose 1.5% of total salary

Mumbai, Jan. 30 Employees of Tata Consultancy Services will lose about 1.5 per cent of the total cost to company (CTC) salary for the next two months, as the company failed to meet its internal economic value added (EVA) target of Rs 376 crore for the first time.

Though a company spokesperson said that the move will not have any relation to future wage hikes and that clarity on this front will emerge only by March end, the action has predictably jolted TCS staffers. In the third quarter, TCS fell short of meeting its internal EVA target of Rs 376 crore by about Rs 83 crore; this shortfall will be recovered from employees’ salaries in February and March, the spokesperson added.

The company believes that the cut is not a huge proportion of the overall CTC and hence it will not spike attrition. Moreover, the provision to adjust variable pay depending on the company’s performance and several other external factors is clearly articulated in the company HR policy. “The annual increment letter clearly states that the employees are given the variable pay in advance and that adjustments for the same will be made on an ongoing basis,” the company spokesperson said.

EVA calculation

EVA is calculated as net operating profit after taxes minus a charge of the opportunity cost of the capital invested. According to the income structure of most TCS employees, 30 per cent of their salary is variable in nature. This variable component is paid at the beginning of the quarter, in anticipation that the company will achieve a pre-set EVA target. In the third-quarter, however, the company was unable to achieve its goal owing to various factors such as higher onsite component of revenues, lower utilisation rates, rupee appreciation and several one-time taxation issues.

Even though employees are divided over whether the cut merits a job change, several TCS staffers told Business Line that they are watching the move with caution. “Though the official word is that the situation will be reviewed by March end, we are preparing for a regime where in we continue with a pruned salary,” a TCS employee told Business Line on the condition of anonymity.

If the dip is extended beyond the quarter, it could have a negative impact on employee sentiment and thereby spike attrition for the company, say industry insiders. Already the move has been condemned on various user-generated content such as blogs and forums.