Top Indian IT companies Tata Consultancy Services (TCS), Infosys, HCL Technologies, and Wipro are adopting the pyramid restructuring model to cut costs. This, according to the firms, will help their margins grow. High talent retention costs like retention bonuses, out-of-cycle wage revisions, and salary hikes have been impacting their margins. Moreover, the $227 billion industry is bracing for an economic slowdown as analysts predict a global recession.
What is the pyramid restructuring model?
This model comprises a larger number of employees with less experience and fewer employees with more experience. This will eventually lead to a reduced wage bill. It can be implemented as part of the firms’ cost-cutting strategy.
For instance, in the case of Infosys, the company will continue to make strategic investments in talent via hiring and competitive revisions. This will, for sure, impact margins in the immediate term. However, the long-term goal is to reduce the attrition rate and ensure a good future for the company.
Analysts also predict margins getting affected by the increase in travel costs, wage hikes for senior employees in Q2FY23 and supply-side cost pressures
