MindTree Cuts Pay

Bangalore: Mindtree has been hit by global economic slowdown as it has cut salaries of some employees by 15 percent. These employees belong to research and development services unit (R&D) and had experience between one to seven years. "(Employee) utilization in the division has now fallen to 60 percent, so we have reduced pay by 15 percent for some staff. It is necessitated by the fact that utilization has been below the expected level," said Puneet Jetli, Senior Vice President and Head, Global People Function, Mindtree to SiliconIndia in a telephonic interview. The cut is applicable from August 1, 2009, and affect about 150-200 people out of the total 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 Jetli, who believes that in times like these their customer don't make many products, that's the reason why only R&D unit has been hit.

Jetli also added that there are two ways an employee facing pay cut can start getting his salary back. One is if they themselves start getting assigned to customer projects and the second is if the R&D unit crosses 65 percent utilization.

The company has reported revenue of Rs. 3.05 billion, up 36 percent from a year earlier. 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 percent of Mindtree's revenue as compared to 17.7 percent in the previous quarter.

Many Indian software companies have been hit in past few quarters and customers in U.S. 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 percent salary. We did not want to take any such drastic action," added Jetli.

If the situation does not improve in the R&D unit it is possible that 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.

Source: Silicon India