Narayan AmmachchiWipro, India’s IT services giant, admitted to hiring thousands of fresh graduates at about half the salary it had offered when they were interviewed in college campuses the year prior.
About 92% of them agreed to the deep cut, the company’s CFO, Jatin Dalal, confirmed to the Economic Times.
The huge cut in salary has sent shockwaves through the IT job market in the country, yet analysts doubt the news will lower salaries across the board. However, they did agree that the episode could motivate Wipro’s rivals to try to achieve similar resutls, as they too are struggling with high payroll costs.
Indian IT companies spend nearly 60% of their revenues on wages, a far higher figure than their Western counterparts, according to an analysis by the country’s business daily Mint.
Wipro is reported to have hired more than 22,000 recently graduated engineers in the last fiscal year, as the sudden demand for IT services, coupled with a high attrition rate, increased demand in the labor market.
The manner in Wipro persuaded the freshers has angered IT workers’ unions as well as graduates looking for jobs.
The Bangalore-based company reportedly gave them appointment letters offering about US$7,800 annually, but delayed their hiring for months on end. In early February (nearly four months later), Wipro gave them four days to decide whether they wanted to accept a salary cut in exchange for being hired right away.
A majority of the graduates jumped at the opportunity, as they had already become increasingly concerned about the massive layoffs taking place elsewhere in the industry.
The episode confirms that rising labor costs have been keeping IT executives awake at night as the value of company shares continues to erode following weak quarterly results.
In its most recent earnings call, HCL Tech promised to lay off under-utilized staff, while Infosys assured investors that a reduction in hiring would lead to higher margins in the months to come.
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