Will other IT companies follow TCS and put salary hike on hold?

The decision of Indian IT services companies like TCS to put the salary hikes on hold, has brought to the fore the challenges in the IT sector and uncertainty prevailing in the IT services segment.

Though reports point out that salary hikes will be minimal among Indian IT services companies, there are speculations that there is a possibility that many other IT services companies might also put their annual salary hikes on hold. Market reports, however, point out that salary hikes in the Indian IT services sector will be in the range of 4 to 8.5 per cent due to uncertain economic challenges and the rise of AI.

According to market reports, many companies are even taking skill-based tests and are contemplating giving hikes on the basis of new skills they have acquired.

Quarterly results of companies such as Wipro and Infosys are still awaited and it needs to be seen that if there is a similar announcement by either of them looking at the uncertainty ahead. For companies such as L&T Technology Services, salary hikes are done in the period of June/July, and currently the appraisal process in the company has just started and there is no intimation to hold any salary hikes at the moment.

Experts point out that Indian IT Services companies are hugely dependent on the health of the global economy for their future prospects. To make things a bit more complicated, rapid technological changes such as AI bring them new business opportunities and at the same time, disruption in their regular workflows. These two factors necessitate tightening the belts.

“Deferring salary hikes, making variable salary a bigger part of the total salary, strict monitoring of employee performance and productivity, and aggressive management of resources on bench are the methods companies will deploy to deal with the volatility and uncertainty in the business environment,” pointed out Aditya Narayan Mishra, MD and CEO of CIEL HR.

The uncertainty in the business is going to create confusion in the sector as corporates would be reluctant to spend on IT and will refrain from going in for multi-year mega deals due to the possible Trump tariff effect although delayed for 90 days now. The major issue will be the uncertainty in the business environment that will lead to deal decision delay. At the same time, there could be greater scrutiny on discretionary IT spend. While there was an expectation of discretionary spend coming back after two years of relative lull, this will unlikely to happen across most industries. Product-oriented industries (manufacturing, retail, CPG, etc.) bearing the direct brunt of tariffs are going to be hit harder. It means IT service providers exposed to these industries will be impacted more. All these factors will lead added pressure on the Indian IT services companies.

However, given the huge workforce that TCS has, the deferring of salary hikes by the company does not bode well for the Indian IT services segment as it will affect the consumption of its employees and would be discouraging for them. One can only hope that the clouds of uncertainty are over and the IT companies see few green shoots in the near future.

Business