Now, Cognizant cuts variable pay steeply

For the first time, the best performers at US-headquartered Cognizant Technology Solutions (CTS) will receive only 95% of their variable pay for 2016, significantly lower than the usual 150% to 200% they used to earn earlier, indicating the headwinds the sector faces.

This comes on the back of news of the company preparing to let go as many as 6,000 employees this year, seen as underperformers.

CTS, which has over a third of its workforce in India, has often been the bellwether in the IT indsutry in variable payouts. The company is known to have given over 100% to top performing employees between 2009 and 2015 when the company was ahead of its peers in the industry. In 2015, top performers bagged upto 190%, significantly higher than 135% for the prior year.

“CTS has a performancebased culture and our variable payout is a function of company and individual performance. In previous years where we outperformed our goals, we paid significantly above the target payout. In 2016, we missed our original goals and our variable payout is reflective of that," a Cognizant spokesperson said in an emailed response to TOI.

Cognizant said in an internal letter, a copy of which was accessed by TOI, that employees will be paid their variables by March 21.

Cognizant's yearly appraisal system starts in January and ends in December as per the company's fiscal.All achievements, certifications, client appreciation and extra curricular activities make an impact in the appraisals. The company has four types of ratings: EA (Exceed All), Exceed Most (EM), Meet All (MA) and Meet Some (MS). For the recently conclud ed appraisal process, Cognizant has given out about 95% of the variable pay to employees who have been rated EA, 75% to employees who have been rated EM and 50% to employees with MA, according to sources familiar with the matter.

An employee, who was rated as EM, got Rs 15,000 as his variable pay, according to his appraisal letter seen by TOI. For another employee, who was ranked EA last year, the drop is significant, from 190% last year to 95% this year.

Kris Lakshmikanth, CEO of HR consultancy firm HeadHunters India, said, “The lower-than-expected variable payout at Cognizant is a harbinger of things to come in the IT industry.Sales professionals have targets to go after, but those specialising in the tech domain are impacted with fast changing skill sets along with automation forcing them to upskill themselves."

For the year ended December 31, the company reported revenue of $13.49 billion, significantly below its guidance of $13.65 billion-$14.20 billion it made at the start of the year, impacted by mutiple macroeconomic factors and sluggish faced by the IT sector.

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