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

TCS cited several reasons for cutting down employee salaries. The major reason for the unprecedented cut in variable pay was its inability to meet the EVA target for the third quarter of the FY 2007-2008. The rise of the rupee against the US dollar was another major concern for TCS. The rupee had appreciated by 12 percent against the US dollar, building tremendous pressure on the company's margins and revenues. (Refer to Exhibit IV to see how Indian Rupees rose against the dollar; and Exhibit V for how IT/ITES companies have reacted to the rupee rise)...

Despite TCS' claim that it would make salary adjustments in the next quarter, the employees remained divided and expected this trend to continue. A TCS employee said, "Though the official word is that the situation will be reviewed by March end, we are preparing for a regime wherein we continue with a pruned salary."

Further, the pay hikes of employees in the Indian IT industry were poised to become moderate with pressure building on export earnings of Indian IT companies due to the rising rupee and signs of a slowdown in the technology spend in the US due to recession...