Mahindra Satyam defers salary hike, incites fears of lay-off

HYDERABAD: Software services firm Mahindra Satyam has decided to defer salary increment to employees till October, instead of giving them out in the June quarter as is customary in most IT firms. The company intends to send out letters communicating the revised salaries by September and give the increments effective October 1, according to an e-mail sent to employees by Hari T, chief people officer.

"We have still some ground to cover on the operating efficiencies and our business units are working overtime to ensure that we can reach industry norms," the e-mail said. The company's decision has not gone down well with employees. Mahindra Satyam's peers, Tata Consultancy Services, Infosys and Wipro have already revised salaries.

According to the e-mailed letter, individual letters reflecting performance ratings and promotions (where applicable) will be communicated to employees on July 31. "We have walked together towards a destination that we know would make us all feel very proud. While we had many choices in front of us, we had collectively chosen to sign-up on one overarching objective - to take Mahindra Satyam on the growth path once again," the letter added.

It also pointed out that multiple initiatives were underway to get Satyam back to its high performance trajectory and the interim time delay and subsequent margin improvement plans will be to the benefit of the associate, unit and the organisation in the long run.

"One possible reason they may be doing this is because they could be expecting some upward revision in pricing from existing clients which may off-set the impact of the wage hike. Had the hikes been given in the current quarter, their margins would have taken a hit," said a Chennai based IT analyst working with a domestic brokerage firm. He said the wage hike could erode the company's margins by about 350 basis points.

Employees, however, were not pacified and some feared another round of lay-offs. "We are afraid the company may lay off another 2,000 people. We cannot even apply anywhere else as we are yet to receive the pay revision letter," said an employee. "It is an effort to show good revenues and high EBITDA margins. Once wage hikes are given the operating profit margins may come down to about 7% from the present 13%. This will be major problem for a company whose margins are considerably lower than its peers. Besides our billing rates are lower than others in the industry," added another.

After taking over scam hit Satyam Computer Services in April 2009, Tech Mahindra had taken up a major restructuring. The staff strength of the company had come down from 44,000 people in FY09 to about 27,000 in FY10.

In an FAQs to the employees, the management said "Our continuing efforts to balance our revenues and expenses has been a daunting task and we need to finalize these margin expansion plans and implement across the organisation and hence the time required."