How TCS is Planning to Take on Recession

TCS to increase work hours from 40 to 45 per week

Source : Moneycontrol.com

After resorting to cutting travel and other expenses, Asia's largest software company TCS is making its employees work harder to counter the slowdown.

Speaking in Kolkata, TCS's HR Head told CNBC-TV18 that work hours will be increased to 45 hours a week from 40 hours earlier. Meanwhile, TCS CEO S Ramadorai said the company will move to just-in-time hiring.


Ramadorai said, “With regard to going to the campuses for the recruitment for the next season, namely, for the people who will be coming on board from 2010 onwards, there we have very clearly said that we will not come in the fifth semester as we used to go." He added, "But we will delay it to come closer to the graduation day when they come out. So that the demand projection should become a lot clearer.”


TCS to review variable pay; employees to work more
Source:Business Standard


In a clear admission that it is facing hard times, India’s largest software exporter Tata Consultancy Services (TCS) said it plans to review the variable component of employees' salaries in an attempt to cut costs.

Variable pay account for 20 to 35 per cent of TCS employees' gross salary, depending on their hierarchy.

“We are trying to reduce costs. Currently our largest expenditure -- around 54 per cent of our revenues -- is manpower cost and employee salaries. We are not contemplating a pay reduction. But we are reviewing the employee variable pay," CEO and MD S Ramadorai told reporters here today.All employees, from trainee to the senior-most manager, get variable pay.

"We are also increasing employee working hours from 40 hours a week to 45 hours a week, with effect from April 1,” he added.

The company may also defer absorbing nearly 24,500 campus recruits, scheduled to join in June.

Their salaries may also be revised, said Ramadorai.

According to analysts, a 10 per cent increase in working hours could add half a million billable hours for TCS alone, given that over 55 per cent of the company's contracts were the Time & Material variety.

The Rs 35,000-crore TCS also expects flat or lower Q4 results because its US clients have started pressuring the company for a reduction in price ranging from 4 to 15 per cent. "Q4 results will either be the same as third quarter or may see a dip,” Ramadorai indicated.

The company also plans to delay infrastructure and new projects to save costs. "TCS will also reduce spending on infrastructure. To this effect, capital expenditure of TCS in the next financial year will be less than Rs 1,400 crore announced for 2008-09,” Ramadorai said.

The company has reportedly laid off over 100 emloyees in the UK. “A lot of our work is on contract. Also, we retain employees, especially the ones on probation, on performance, and if their performance is not up to the mark, we ask them to leave. Although I am not sure why the employees in the UK were asked to leave, two of the reasons could be that their contracts ended or or bad performance. Going forward, a lot of emphasis this year will be on employee efficiency,” Ramadorai said.

“We are also focusing on more offshore projects right now to cope effectively with the recession by moving more roles and delivery functions to offshore locations such as India,” Ramadorai added.

TCS serves customers such as British Airways, BT and United Utilities in the UK. The company has around 4,800 professionals working at almost 65 customer sites in the UK and Ireland.

“In the last nine months, TCS has hired 30,000 people. For now, we have frozen our lateral hiring and may look at laying off employees if the situation does not improve. Currently, we have around 1,30,000 employees on our pay roll,” Ramadorai added.

TCS to increase working hours, may freeze variable pay
Source:Economic Times


It’s official now. Tata Consultancy Services (TCS), the country’s biggest software company in terms of sales, may freeze variable pay to its over 1 lakh employees as part of a string of cost-management initiatives to cope with the pangs of the global meltdown. The company has also decided to increase employee working hours from April 1, 2009, to 45 hours per week from the present 40 hours that every TCSer needs to clock each week. This was indicated by TCS chief executive officer & managing director S. Ramadorai here on on Thursday.

"In a bid to rein in total manpower costs and spruce up employee efficiency and productivity levels, TCS will take a relook at its performance-linked variable pay practices. Variable compensation payout accounts for 7.5-to-8% of our revenues and this will now be reviewed," said Mr Ramadorai. Manpower costs account for 53% of TCS’s total costs.

Elaborating on other initiaitives to beef up internal efficiences, Mr Ramadorai also confirmed that TCS is increasing employee working hours to 45 hours a week from the present 40 hours per week level. "We believe the additional five hours can be effectively used to upgrade employee skills wherever necessary," said Mr Ramadorai.

Incidentally, the variable component of a TCS employee’s salary is linked to the performance of the company, the business unit of the individual and the individual’s performance. At present, it ranges between 20-to-35% of an employee’s gross salary. Comprising of distinct `company’ and `employee’ components, the variable allowance payment to each TCS employee happens on quarterly and monthly basis respectively, said a TCS official. More importantly, the variable pay increases with seniority.

The latest developments come at a time when TCS is under increasing pressure from global clients to reduce its cost of service delivery and is even losing clients who are trying to drive a hard bargain. "I cannot share client specifics. But it’s true that we have lost some clients. One client, for instance, demanded a 70% discount which was simply unsustainable," said Mr Ramadorai, in response to a specific query.

Dwelling on TCS’s plans to unlock internal efficiencies in times when the company was experiencing muted growth, Mr Ramadorai said: "Our capex was at Rs 1400 crore in 2008-09. You can now expect our future infrastructure-related spends to either get delayed or reduced. They will be rationalised based on real-time decisions once we take a call on the infrastructure budgets for the next fiscal.

TCS managing director S. Ramadorai, however, is unwilling to confirm whether the company’s Rajarhat software campus rollout will hit a roadblock in the backdrop of the company’s decision to cutback future infrastructure-related spends.