Mindtree, a global Software giant, has been hit by global economic slowdown forcing to cut the salaries of some of the employees by 15 per cent. These employees belong to Research and Development (R & D) services unit and had experience between one and seven years. "Employee utilization in the division has now fallen to 60 per cent. So we have reduced their pay by 15 per cent. It is necessitated by the fact that utilization has been below the expected level," said its Senior Vice President and Head, Global People Function, Mr Puneet Jetli on Thursday.
The cut is applicable from August 1 and affects about 150 to 200 staff members out of the total of 7800 employees.
Employees facing this decision are the ones who have been not on project for more than 30 days. Out of the six business unit in Mindtree, R&D unit has been hit hard due to economic slowdown. "R&D consists of customers who build product in technology sector. These customers are people who revolve around semiconductor industry. Semiconductor industry has been worst hit due to recession," says Mr Jetli, who believes that in times like these their customers do not make many products. “And, that is the reason why only R&D unit has been hit,” he explained talking to TN over phone.
There are two ways an employee, facing pay cut, can start getting his or her salary back. One is if they themselves start getting assigned to customer projects and the second is if the R&D unit crosses 65 per cent utilization.The company has reported revenue of Rs 3.05 billion, up by 36 per cent than the corresponding year last year. It also posted a net profit of Rs 567.3 million in the June quarter. But in the quarter ended June 30, R&D contributed only 14.1 per cent of Mindtree's revenue compared to 17.7 per cent in the previous quarter.
Many Indian Software companies have been hit in the past few quarters and customers in the US and Europe are looking for much cheaper options for product and services. Already, Tata Consultancy Services (TCS) and Infosys have reported a decline in staff numbers for the June quarter. Mahindra Satyam and Hexaware Technologies have asked few employees who are not working on active assignments to take a long leave. "We did not want to send people to virtual pool or layoff. So, this is just the short term process. Some organizations have put their employees on 40-50 per cent salary. We did not want to take any such drastic action," added Mr Jetli.
If the situation does not improve in the R&D unit, it is possible that the number of people facing a pay cut might increase. At the company's first quarter results announcement last month, Mindtree Chief Executive Krishnakumar Natarajan had predicted that the company expects the growth to be muted in the next few quarters. This move by Mindtree proves that the company might have to make many changes to fight and adapt to the slowdown in Indian IT sector.