Why Infosys Pushed Back Salary Hikes For Employees

In an e-mail addressed to employees, Infosys chief operating officer Pravin Rao said the outsourcer is deferring salary hikes for employees to July and even later in case of senior executive. Typically, Infosys rolls out increments from April but this year the hikes have been pushed back. Although Infosys did not attribute any specific reason for this move, domestic brokerage Nirmal Bang says margin pressure could be the likely cause. "Margin pressure is likely greater than what was expected a month ago (Infosys lowered its FY18 EBIT margin band by 100 basis points to 23-25 per cent)," the brokerage said in a May 15 research note.

Here could be some of the reasons behind Infosys' deferring salary hike, according to Nirmal Bang report:

1) Softer-than-expected revenue growth in seasonally strong 1QFY18 - from likely continued execution challenges that it mentioned for 4QFY17.

2) The optimism around a pick-up in spending by BFSI clients because of interest rate increase in the US and likely financial sector deregulation has not been borne out so far. We (Nirmal Bang) believe higher profits of BFSI clients are being returned back to shareholders, spent on global in-house captives and/or on digital where Indian Tier-1 IT players are on a weak footing.

3) Greater-than-expected pricing pressure. 

4) Pressure on margins likely to come from an appreciated INR (rupee)/USD (dollar).

5) To offset costs of hiring local staff in the US - Infosys indicated hiring of 10,000 employees over FY2017-FY2019. Some of the local hiring would have been front-loaded as the lack of premium processing option reduces visibility on renewal of H1-B visas