In a town hall from the company’s newly refurbished Kolkata office on Thursday, Cognizant chief executive S. Ravi Kumar promised salary hikes from 1 August even as bonuses to eligible employees will be rolled out in March.
“Cognizant will award bonuses in March. Associates will receive eLetters with bonus details the week of 10 March,” read Cognizant’s internal memo shared with employees and seen by Mint. The company further instructed managers to communicate the bonuses to their team members by 11 March.
The Teaneck, New Jersey-based company typically gives hikes and bonuses around March, but since Ravi Kumar took over as chief executive, bonuses are given in March while hikes are given in August. Cognizant last gave hikes ranging between 1% and 5% in August last year.
Kumar’s early proclamation of a hike this year is possibly being done to arrest attrition.
Voluntary attrition in the tech services arm, which makes up the bulk of the company’s workforce, rose to 15.9% at the end of 2024 from 13.8% in the year-ago period. Attrition refers to the number of people who have left their company.
As of December 2024, Cognizant’s voluntary attrition is higher than peers such as Tata Consultancy Services Ltd, Infosys Ltd, and HCL Technologies Ltd, which reported attrition of 13%, 13.7%, and 13.2%, respectively, in the last 12 months. To be sure, attrition for TCS and Infosys includes attrition for their IT services arm, whereas HCLTech excludes the digital process automation wing.
Turnaround ahead?
Kumar, since taking over the corner office of Cognizant, is in the midst of turning the company’s fortunes around. Cognizant saw its full-year revenue decline in 2023, but in 2024, full-year revenue grew 1.98% to $19.74 billion.
Still, most of this growth was on the back of acquisitions.
Cognizant noted in its fourth-quarter earnings that its recently completed acquisitions of Belcan and Thirdera made up 200 basis points, or 2%, of its 2024 revenue growth. This implies that the company’s business, discounting its acquisitions, declined last year.
Cognizant acquired Belcan in September 2024 for $1.3 billion to strengthen its position in the engineering research and development (ER&D) sector. In January of the same year, it acquired Thirdera for $430 million to build an artificial intelligence offering.
Indian IT services companies follow an April-March financial calendar, whereas Cognizant follows a January-December one.
Another reason for high attrition is Kumar’s policy of going after redundancies.
Four months after Ravi joined as chief executive, Cognizant said it would sack 3,500 employees in 2023. The firm even announced its plans to close 45% of its office space in India, which at that time had about 73% of the total 355,300 employees.
Its earlier policies of eliminating middle-to senior-level talent make it challenging for the company to retain talent.
Cognizant’s delay in rolling out hikes aligns with the industry practice as the largest homegrown software service providers are looking to combat uncertain macroeconomic conditions and shore up operating margins.
“It is unusual that the company announced hikes this early,” said an employee with knowledge of the matter. “This announcement was probably made to retain employee confidence,” added the employee.
A former employee voiced a similar sentiment.
“The fact that Ravi Kumar had to announce Cognizant’s hikes five months before it would be effective is a cause for concern. Something is clearly not right, and Kumar wants the employees to know that hikes will be given and not skipped for any employee,” said the former executive on anonymity.
An email sent to Cognizant on Saturday remained unanswered.
Tough times
But Indian heritage Cognizant is not the only top service provider in the country to delay hikes.
Mumbai-based Tata Consultancy Services Ltd was the only large IT service provider to roll out increments on time, awarding employees hikes of 4.5-7% in the April-June 2024 period.
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Of the top five, Infosys and HCLTech have announced the rollout of salary hikes in tranches. While Infosys announced a first tranche of hikes ranging between 5% and 8% in February, HCLTech started rolling out hikes of around 7% in the October-December 2024 period.
Bengaluru-based Wipro Ltd handed out 4-8% salary increments from September last year. In contrast, Tech Mahindra Ltd rolled out fatter paychecks to employees in January, offering hikes of around 7% on average.
At least one expert said there was a larger reason behind the delay in hikes by the country’s largest software service providers.
“The Indian IT industry is holding its breath and taking a defensive position,” said Peter Bendor-Samuel, founder of Everest Group, a Dallas-based IT research firm.
“Going into the year, it looked like the market had hit bottom, and we were set for a recovery. However, the uncertainty created by the new US administration is spooking the market. Clients are holding off on planned projects, and many in the industry fear we are sliding back into the delay and cancel environment we have been experiencing for the last two years,” added Bendor-Samuel.
