Faced with imminent recession in the United States, Indian IT services companies with major exposure to the North American markets are likely to cut the onsite allowances of employees deployed at clients' offices abroad by 25 to 30 per cent from April 1, 2008.
According to informed sources, leading Indian IT service providers like Tata Consultancy Services, Infosys Technologies and Wipro have launched independent studies to arrive at the revised "per diem" (daily rate of payment) for onsite employees in a bid to cut costs. The move follows IT majors like IBM, TCS and Yahoo weeding out staff for "poor performance".
Each IT company has a different method of paying the salaries of onsite employees. Some companies, for instance, deposit the basic salary into the employees' account in India and pay a per diem rate towards their daily expenses.
Infosys pays a per diem of $45 (around Rs 1,780) currently to its onsite employees. Now, there is a proposal to reduce it to $35 per day (around Rs 1,380) -- a Rs 400 cut per day -- according to sources.
A spokesperson for Infosys said, "As of now, there is no such proposal. We will disclose the details of the changes, if any, once the compensation given to employees is reviewed at the end of the fiscal year."
However, a few employees of Infosys admitted to having been informed that there could be a reduction in per diem for onsite employees in the US.
"Earlier, most of us could make a saving from the per diem allowance. If it is reduced to $35 per day, we will not be in a position to do so and onsite postings will not be attractive anymore," an Infosys BPO employee said.
The move is likely to have a major impact on employee morale as their earnings from temporary stints abroad, rather than the Indian salary, provide the icing on the cake.
Wipro, on the other hand, is hiring more local talent at client locations to reduce deployment of staff from India for onsite assignments.
Recently Wipro Chairman Azim Premji had said: "If we hire people locally, it will displace people we send from here on H1B visas. So net-net, it will not mean an extra cost to us." If this happens, there will be fewer plum jobs for the boys in India.
TCS pays Euro 1,900 per month to each onsite employee in Europe. "We have been told that the per diem rate for the US is being revised. But the per diem for onsite employees in Europe will not change," a TCS employee said on condition of anonymity.
European IT services companies operating in India too are planning to reduce the per diem rate. Logica CMG -- which has deployed a large number of Indian employees on site for clients in the Netherlands, Belgium and the UK -- plans to cut the per diem rate by 30 per cent.
At present, it pays Euro 49 for onsite employees in the Netherlands and £35 in the UK as per diem.
"We have been told that a study is on to bring down the per diem rate from the next fiscal," a Logica CMG employee stated.
Infosys is also looking at other markets for growth in an effort to reduce its dependence on the US.
During the third quarter results announcement, Infosys CEO S Gopalakrishnan had said: "Over a period of time, we want to bring down the percentage of overall revenue from the US to close to 50 per cent and raise the percentage in the rest of the world -- to 20 per cent in Europe and 20 per cent in Asia Pacific including Japan."
Though nominally, onsite workers in Europe or Japan earn more (in terms of the rupee value of the daily allowance), the cost of living in these geographies is higher than in the US.