Pay and attrition

BANGALORE: Infosys Technologies will offer up to 17% salary hikes for over 100,000 of its employees this year, as the company seeks to retain staff and also attract new recruits in the year when most of its rivals are expected to lock horns in the war for talent.

With top customers, such as General Electric, British Telecom and Microsoft, expected to send more projects offshore to lower their operational costs by half, multinational rivals, such as IBM and Accenture, apart from Indian offshoring firms including Infosys, will have to deal with double-digit attrition rates, and ensure uninterrupted delivery of services. “There will be a war for talent and it’s one of our biggest worries in the medium-to short-term,” said S Gopalakrishnan, chief executive of Infosys.

This year, India’s $60-billion outsourcing industry is expected to hire around 150,000 new staff in order to cope with higher demand for offshore outsourcing.

Indeed, nearly 4,500 Infosys employees decided to quit the company after introduction of a new employee rating system called iRace — a new grading programme started by Infosys to grade employees last year across different levels according to their roles. Of these, nearly 2,500 staff were given promotion, while the remaining were retained at the same level.

The salary hike will translate into $135 million, as a cost for the company, and also affect its profitability by 3%. “This is the largest-ever salary hike given by any company in the IT industry,” said TV Mohandas Pai, V-P, human resources, Infosys. The company, which began the FY10 with no salary increases due to the recession offered an 8-10% mid-term increase in salary during October last year. The latest salary increase will be effective from April, while senior managers will be getting the same in July.

Besides iRace, the reason behind this hike is the improving market conditions and search for talent. Despite the improving conditions, employees in many companies are holding on to salary levels of 1-2 years ago. According to a senior company official, this salary increase is also a message to its competitors who are indulging in “irrational pricing” and would now be forced to look at salary increases.

For its onshore employees, Infosys plans to give a 2-3% raise in salary. At the end of FY10, the total number of employees in Infosys stood at 1,13,796 and made a gross addition of 27,639 during the fiscal. For FY11, Infosys plans to hire 30,000 people, of which 19,000 would be trainees.

However, the attrition rate of Infosys went up during the fourth quarter of FY10 touching 13.4%, against 11.6% in the third quarter.

However, about 3% of the 13.4% was involuntary attrition of trainees, which Infosys claims were unable to pass its ‘benchmarking’ tests. According to Mr Pai, the company expects the attrition rate to stabilise in the next six months.

According to Mr Pai, the remaining impacted employees can expect promotion during the next promotion cycle in October. The iRace programme created a furore in the organisation, on blogs, in town hall meetings and even on websites. The company is now trying to pacify those employees, and plans to promote them too. “Our learning has been that managers need to communicate with employees better. For an employee, it’s the manager who represents the company to him,” said Mr Pai.


The above article shows the situation of one of India's leading It organization Ifosys. the organization which proudly puts up ads about employees who have stayed on for 10 years and all but am not able to understand how they are able to make a rudimentary mistake. The attrition rate has gone to 13% and they have actually reacted and not responded to it. If this was the pattern over atleast two quarters they could have gone for this Move of increasing the pay by a drastic 17%.

The financial implication wont be exorbidant for an organization like Infosys because if we understand their business structure they have probably the highest billing rates among the so called SWITCH companies (@ about 18-20% compared to 4% previously followed by Satyam).

They have also mentioned about a new PMS system called iRACE. This is an organizational change and probably this may not have been implemented properly which requires a look into how the people have accepted if they have not then that could be the prima force for this exodus of people from the organization.

This kind of inflating salaries is actually a good sign for the employees but they will be well aware that it is more of an organizational policy and not to reward individual performances. the recent Watson towers studies indicated that we have 40% engaged employees and the rest were not engaged. How effective has been their Engagement programme.

Finally how has been the Human touch of HR in the policies somewhere we need to understand Humans may not always liked to be considered as a physical resource like a machine but rather by their emotions and feelings which stresses upon the human factor to help them personally !!

I just hope this does not follow suit by other organizations as We are just forgetting our concepts that Money is importnat but not most important

Cheers

Arvind !!