Compensation Management at Tata Consultancy Services Ltd.: Coping with Turbulent Times in the Indian IT Industry


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Case Details:
Case Code : HROB112
Case Length : 18 pages
Period : 2003-2008
Pub Date : 2008
Teaching Note :Not Available
Organization : Tata Consultancy Services
Industry : Computer, IT & ITES
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

The Reasons

TCS cited several reasons for cutting down employee salaries. The major reason for the unprecedented cut in variable pay was its inability to meet the EVA target for the third quarter of the FY 2007-2008. The rise of the rupee against the US dollar was another major concern for TCS. The rupee had appreciated by 12 percent against the US dollar, building tremendous pressure on the company's margins and revenues. (Refer to Exhibit IV to see how Indian Rupees rose against the dollar; and Exhibit V for how IT/ITES companies have reacted to the rupee rise)...

The Debate

TCS' move to cut employee salaries received severe criticism from some quarters. TCS' reputation as one of the topmost IT employers in India took a beating as its decision to cut salaries shocked many of its employees. Many employees even opined that TCS could have cut down on some of its other expenses instead of cutting the compensation of its employees...

Outlook

Despite TCS' claim that it would make salary adjustments in the next quarter, the employees remained divided and expected this trend to continue. A TCS employee said, "Though the official word is that the situation will be reviewed by March end, we are preparing for a regime wherein we continue with a pruned salary."

Further, the pay hikes of employees in the Indian IT industry were poised to become moderate with pressure building on export earnings of Indian IT companies due to the rising rupee and signs of a slowdown in the technology spend in the US due to recession...

Exhibits

Exhibit I: Top IT Employers in India (DQ-IDC BES Survey 2007)
Exhibit II A: Employee Satisfaction Scores of IT Companies (DQ-IDC BES Survey 2007)
Exhibit II B: HR Scores of IT Companies (DQ-IDC BES Survey 2007)
Exhibit III: TCS' Position in BusinessWeek Top 100 IT Companies: 2007
Exhibit IV: Indian Rupees to US$1
Exhibit V: How IT & ITES Companies Have Reacted to the Rupee-rise

 

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