Infosys delays pay raises to Q4 as IT sector faces global headwinds

India’s second-largest IT services firm, Infosys, has deferred its annual salary hikes to the fourth quarter of the current financial year (Q4FY25). The Bengaluru-based company last implemented salary hikes in November 2023.

Typically announced earlier in the year, the delay reflects ongoing uncertainty in the global demand environment, especially for discretionary IT services. The sector is grappling with weak discretionary spending, delayed client budgets, and broader macroeconomic headwinds.

Rivals HCLTech, LTIMindtree, and L&T Tech Services also opted to defer pay raises during Q2 in an effort to maintain profitability and control costs.

On October 17, Infosys CFO Jayesh Sanghrajka confirmed during a post-results press conference that the company plans to implement hikes in a phased manner, with some becoming effective in January and the rest in April.

In Q2FY25, Infosys reported a 2.2% sequential rise in net profit to ₹6,506 crore, missing market expectations. Margins improved by 10 basis points due to reduced onsite costs, better utilisation, and enhanced operational efficiencies.

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Despite the absence of wage hikes, analysts, including those at Motilal Oswal Financial Services, anticipate margin pressures in the December quarter due to furloughs and fewer working days. These challenges are expected to be mitigated by pricing gains, subcontractor cost optimisation, and Infosys’ margin improvement plan, Project Maximus.

A tepid job market has given IT firms confidence that delaying salary hikes won’t lead to mass resignations. Selective hikes continue for top performers, especially in high-demand areas like artificial intelligence, where delivery units reward exceptional talent.

In the current environment, retaining employment itself is considered a bonus, as the IT industry navigates a challenging period.