American multinational IT services company, Cognizant, is reportedly planning to increase the variable component of its employees’ pay package. This will help the Company adjust expenditure when there is a slump in growth and manage margins.
Not only is the software exporting company trying to reduce management layers, but it is also revamping its sales and business strategies in the process.
By increasing the variable pay, which is presently a small part of the pay package, the Company intends to reward those who actually contribute and help towards growth.
The restructuring of the compensation, will not only help lower costs and protect margins, but also make Cognizant ready for growth.
While the variable pay may be 35 per cent or more at the middle levels, it will be much higher at the entry level, where the base is low.
The Company is said to have been performing below expectations in terms of revenue growth and profitability.
Owing to low payout of incentives, the margin for Cognizant’s second quarter saw an improvement. In the case of rival, Infosys, delayed increments and hikes in variable pay, ensured that margin remained steady.
Not long ago this year, Cognizant predicted slow growth with narrowing margins and addition to headcount overtaking revenue growth. This forced the Company to undergo restructuring at the senior-management level and also redo its deal commission structure.
To cut costs, Cognizant is said to be trying to maintain fewer senior employees compared to the number of freshers and those with up to six years of experience. This will also help maintain margins.
The Company is also expected to reduce travel unless it is required for a client. It will rethink business class privileges and restrict expenditure to only marketing events where a minimum RoI is assured.