It is official. Infosys, which was for years an object of envy as an employer for its fat pay hikes, stock options and global dreams, is enforcing an across-the-board wage freeze this year.
This is unusual, because its key industry rivals Tata Consultancy Services (TCS) and Wipro Ltd have
gone ahead with salary increments, although the information technology sector as a whole has been hit by a sluggish recovery in the US and a persisting economic crisis in Europe - the key export markets for India.
Co-founder and managing director SD Shibulal said in an internal e-mail to its over 150,000 employees just after its disappointing quarterly results on Friday that the company would not be able to give wage hikes "at this time".
The mail cited a "tough business environment" and a "challenging outlook" among reasons for freezing the wages.
Shibulal said, "…last quarter, we said that we would review the possibility of increasing salaries during the year. However, given the business outlook, we will not be able to do this at this time."
"We believe we will face strong headwinds for the rest of the year" said Shibulal, who will complete one year at the helm of India's second-largest software exporter in August.
"Infosys is going through a transition process and its long-term strategy remains on track," said Dipen Shah, senior vice-president at Kotak Research Securities.
An Infosys spokeswoman insisted that salary hikes have not been frozen, "but only deferred". She said the company continues to monitor the environment and, "will revisit our decision once we have greater visibility."
TCS and Wipro have already doled out hikes matching the industry average.
Infy's decision to suspend wage hikes is expected to hit company's image as an employer and worsen its attrition rate, which the company had managed to contain over the last one year.
Kotak Research's Shah said the situation might have resulted from an elaborate management restructuring exercise that the company went through and was completed last year.
"The challenges which are for shorter term emanate from the company's insistence on focusing only on higher margin clients," he said.
The big question: how long will the transition at Infosys last?