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IT major HCL freezes salaries, cuts bonuses

IT major HCL Technologies has decided to mitigate pressures on operating margins by freezing salary increments through 2009-10.

The company has told its employees that there won’t be wage hikes for the financial year ending July 31, 2009, due to tight demand in the US and Europe, declining volumes and the need to further tighten expenses across business divisions.

In a harsher step, the company has slashed retainer bonus, which averages 10 per cent of an employee’s salary, from April 1. Travel allowance has been sharply reduced, if not curbed, in most cases. “HCL is discouraging travel requests, except in exceptional cases related to onsite employees. The option for an employee to use his travel allowance has been minimised,” said an HCL employee.

An HCL spokesperson said the recent communication with employees was part of a routine process under which the leadership of the company reached out to employees across the organisation to take stock of the current business environment, changing customer requirements and to together arrive at a comprehensive strategy.

“With increased focus on delivery excellence and operational efficiency, the strategy will enable the organisation to find opportunities in the current environment and carry forward the growth momentum,” said the spokesperson.

The company is also said to be looking at suspending matching contributions to employee retirement plans. Onsite allowances have also been slashed, though the exact quantum in this case is not clear.

Chief Executive Vineet Nayar is known to have met employees of the Chennai office recently, where these cost-cutting measures were spelt out. It is learnt that while the company has not gone for salary cuts at this point in time, a 25 per cent salary cut for employees on the bench has been considered. “Salary cuts were considered, but were not carried out. Instead, employees are now being charged for frills like coffee and refreshments,” said a source.

In January, HCL had said that it would reduce about 280 jobs, or 8 per cent of its global workforce, and implement other cost-cutting measures. The company is learnt to have laid off about 450 people from its British Telecom practice. Redeploying bench resources, which constitute roughly 20 per cent of HCL’s workforce, continues to be a challenging prospect for the company.

Many employees on the bench have been given up to two chances for redeployment on a new project, failing which they have been given the option to leave, sources say, adding that each fresher is being given up to two client interviews.

Besides shrinking IT spends in its key markets of North America and Europe, HCL’s acquisitions of Liberata Financial Services and Control Point Solutions ($20.8 million) last year are believed to have affected its EBITDA margins — which grew 1.1 per cent to 22.5 per cent on a year-on-year basis during the second quarter ending December 31 last year. To add to HCL’s woes, its forex losses owing to the depreciation of the rupee in Q3 of the 2009 fiscal expanded to $207 million from $156 million a year earlier.

While the IT major won big-ticket outsourcing deals totalling $1 billion in Q3, it has decided to strengthen its flagship tech services division by roping in senior executives from its 13,000 strong BPO division.

HCL BPO’s key clients in the UK and Ireland include Axa BPO (acquired by Swiss Re last year) and Barclays Bank.

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