After Infosys, Wipro announces salary hike

BANGALORE: NR Narayana Murthy has made his first significant move upon returning to Infosys by effecting an unexpected round of wage increases for the company's 1.5 lakh employees. By doing so, analysts said, the Infosys chairman is trying to kill several birds with one stone, displaying tactical finesse that has earned him a reputation as one of India's canniest entrepreneurs. 

On Thursday, less than a fortnight after Murthy came back to helm the company, Infosys announced an average increment of 8% for India employees, effective July 1. For employees outside India, the company said the increments will be 3%, albeit with some riders. The biggest push was reserved for its global sales force which will get a raise of 8% effective May. 

Wipro, which announced increments in July last year, also sent a note about an hour after the news Infosys. It said it is giving an average increment of 6-8% for offshore employees and 2-3% for onsite employees, effective June 2013. For high-performers, the raise will be in double digits. A Wipro spokeswoman said the emailed note was in response to media queries. 

"There have been serious issues with employee motivation levels at Infosys. Wipro rolling out wage hikes on the same day shows that it wants to ensure the company doesn't lose employees to Infosys," said Pradeep Mukerji, president and managing partner at outsourcing advisory firm Avasant. Infosys's populist move — a certain vote-winner among staff — could raise morale, enhance Murthy's stock of goodwill and send out a message tostakeholders and rivals that the Infosys co-founder is back and means business. "By announcing wage hikes, Infosys wants to calm down anxiety among its employees and stabilize things within the organization. It is a smart move; however, we do not expect more bold moves Murthy," said Manish Bahl, country manager at Forrester Research. "He will be focused on getting things aligned, talking to clients and creating expertise on the product innovation side." 

Murthy, 66, retired Infosys in 2011 but returned on June 1 this year after halting performances for two years by a company that had earned a reputation as the industry's leader for both growth and profitability. Infosys has guided for revenue growth of 6-10% for fiscal 2014, compared with the 12-14% prognostication by industry lobby Nasscom. 

He will have by his side as executive assistant son Rohan, 30, an alumnus of Harvard and Cornell Universities, as well as the Massachusetts Institute of Technology. Soon after the news of the pay raise, Murthy spoke at a packed 'town hall',he told employees that his son's role would be circumscribed, addressing criticism several observers. 

Several observers had said the Infosys chairman made a mistake by appointing son Rohan as his top aide. Rohan would not be involved in the day-to-day affairs of the company, Murthy observed, and repeated that his son does not aspire to be the CEO of the company. 

Along with the wage increase, Murthy also sent out a message that he expects top-notch performance. He warned those failing to live up to expectations that their future at Infosys is not guaranteed. The company froze pay raises last year when they were due and only announced a wage increase in October. Most employees were expecting that a salary increase, if atit came, would happen only around October. Infosys qualified the 3% average increment for employees outside India saying it is for those who have not been covered by salary increases in February 2013. The extra expenditure is seen affecting margins to the extent of 200 basis points. 

Infosys, with revenues of $7.4 billion (Rs 43,000 crore), has been losing market share to rivals such as Tata Consultancy Services and Cognizant Technology Solutions, and its employee turnover has reached a high of 16.3%. "Murthy felt he needed to address the morale of employees, more so in sales,they have been losing people, and was willing to sacrifice margins for it," said an analyst at a foreign brokerage.