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Cognizant Technology Solutions Corp. has recently announced a significant shift in its salary increment strategy, revealing plans to implement annual salary increases starting August this year. This decision marks the second consecutive instance where the Nasdaq-listed company has postponed salary hikes by a minimum of five months, a move that has raised eyebrows within the tech community. The announcement was made during a town hall meeting at the company’s newly refurbished Kolkata office, where CEO S. Ravi Kumar addressed employees, promising that salary hikes would be effective from August 1.
Understanding the context of salary adjustments
Traditionally, Cognizant has aligned its salary hikes and bonuses with the fiscal calendar, typically rolling out increments in March. However, under Kumar’s leadership, the company has shifted to a model where bonuses are awarded in March, while salary hikes are deferred until August. This change is particularly noteworthy given the rising voluntary attrition rates within the company, which have surged to 15.9% by the end of 2024, up from 13.8% the previous year. Such attrition rates are concerning, especially when compared to industry peers like Tata Consultancy Services, Infosys, and HCL Technologies, which reported lower attrition rates of 13%, 13.7%, and 13.2%, respectively.
Impact of acquisitions on revenue growth
Despite facing challenges, Cognizant reported a modest revenue growth of 1.98% in 2024, reaching $19.74 billion. However, a significant portion of this growth can be attributed to recent acquisitions, including Belcan and Thirdera, which contributed 200 basis points to the overall revenue increase. These acquisitions are part of Cognizant’s strategy to bolster its position in the engineering research and development sector and enhance its artificial intelligence offerings. Nevertheless, the underlying business performance, excluding these acquisitions, indicates a decline, raising questions about the company’s organic growth potential.
Challenges in retaining talent
The high attrition rates at Cognizant can be linked to several factors, including the company’s aggressive approach to reducing redundancies. Shortly after Kumar’s appointment, Cognizant announced plans to lay off 3,500 employees and reduce its office space in India significantly. Such measures, while aimed at streamlining operations, have made it increasingly difficult for the company to retain skilled talent. The delayed salary hikes, which are now being communicated five months in advance, appear to be a strategic move to reassure employees and maintain morale amid growing concerns about job security.
As the Indian IT industry grapples with macroeconomic uncertainties, Cognizant’s approach to salary increments reflects broader trends within the sector. Many companies are adopting a cautious stance, delaying salary hikes and bonuses to navigate the unpredictable market landscape. Industry experts suggest that the current environment, exacerbated by geopolitical factors and changing client demands, has led to a defensive posture among major IT service providers.
In conclusion, Cognizant’s decision to adjust its salary increment timeline is a response to both internal and external pressures. As the company strives to stabilize its workforce and enhance employee confidence, the effectiveness of these measures will be closely monitored in the coming months.