Compensation Management at Tata Consultancy Services Ltd.: Coping with Turbulent Times in the Indian IT Industry

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"There's no ceiling on the bonus. It can be equal to the fixed portion of the salary, providing the cell has shown that kind of EVA growth. It is not just compensation, we wish our employees to also get a feeling of ownership for their own unit, and its performance. We want each employee to feel as if they are running their business. They have to think like entrepreneurs and know the cost attached to their business and how will they add value to the investment."¹

- S. Ramadorai, CEO and Managing Director, Tata Consultancy Services Ltd., in 2000, Regarding its Economic Value Added (EVA)-based Compensation Management System.

"We undertake a review of variable pay every quarter and this time, we decided to make an adjustment."²

- S. Padmanabhan, Global Human Resources Head and Executive Director, Tata Consultancy Services Ltd, in February 2008.

"This wage cut is a reflection of the caution. It reinforces the management view of macroeconomic challenges."³

- Harit Shah, Research Analyst, Angel Broking⁴, in February 2008.

Squeezing the Employee Pay Packets

During the fourth quarter of financial year (FY) 2007-2008, Tata Consultancy Services Limited (TCS), the largest Information Technology (IT) company in India announced its plans to cut 1.5 percent of the variable component of employees' compensation. It clarified, however, that there would not be any changes in the perquisites of its employees. The rapid appreciation of the Indian Rupee against the US dollar over the previous year and the imminent recession in the US economy, which was the biggest market for the Indian IT companies, had put a lot of pressure on Indian IT companies.

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1] "TCS Shifts to Performance-linked Salary Structure," The Economic Times, November 27, 2000.
2] "TCS Jitters Industry - Salary Cut Move. This is Called Recession," www.msjawahar.wordpress.com, February 1, 2008.
3] "TCS Cuts Staff Salaries in Tune with Tough Times," www.economictimes.indiatimes.com, January 30, 2008.
4] Angel Broking headquartered in Mumbai, India, is one of the top 3 broking houses in India.

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