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New Delhi, Apr 9: Indian industry may be taking the knife to salaries and putting bonuses in deep freeze, but that hasn’t deterred some top outsourcing firms from announcing higher-than-usual bonuses to employees, rewarding them for achieving steep targets in difficult market conditions.

The country’s largest BPOs, NYSE-listed Genpact and WNS Holdings and Nasdaq-listed ExlService Holdings, have said that they will cap an excellent year, that saw them improving their profitability, by giving out higher bonuses compared with last year.

Genpact, which has about 36,200 employees globally, has given bonuses ‘slightly higher than last year’, president & CEO Pramod Bhasin said. “Last year was a very good one. So, we had a reasonable employee bonus this year,” he added. Genpact’s net income more than doubled to $125.1 million in 2008, while revenues increased 26% to $1.04 billion. The firm was benefited by increased business flow from existing clients and measures taken to cut costs.

Similarly, EXL managed to meet 95% of its performance targets, despite unfavourable headwinds, president and CEO Rohit Kapoor said. The firm’s revenues grew 19.5% in 2008, a year in which it added 23 new clients and brought down employee attrition.

In 2008, some businesses of EXL performed exceptionally well, such as the transformation services that grew 38%. People who contributed therein were given higher bonuses, while bonus payouts were lower in other businesses, Mr Kapoor said.
Another senior EXL executive, who asked not to be named, said bonuses were 15-20% higher at the BPO firm this year compared with last year. He said the company, which benefited from reduced general and administrative expenses, used some of its cash to pay bonuses.

Most clients of IT-BPO firms have been adversely impacted by the global financial crisis and are either delaying, freezing or lowering their outsourcing spends. This has led to several vendors reducing salaries or announcing lower salary hikes.

Bonuses, which are paid out at the beginning of the financial year, are based on the performance targets for the previous year. At the entry level, bonuses are typically linked to the individual’s performance, while a manager is assessed for individual and team performance. Senior-level employees are awarded bonuses based on the achievements of their business units and the company’s performance.

BPO firms provide non-discretionary services, such as customer support and managing accounts, which are linked to the clients’ daily operations. This makes their business slightly more recession-proof. Also, the BPO market is relatively new and has a lower penetration compared to IT outsourcing. So, vendors such as Genpact and EXL have greater growth avenues.

WNS is in the process of completing the assessment of employees’ performance. It will announce bonuses by April-end. It follows an April-March fiscal year, while Genpact and EXL follow a January-December calendar. “We are definitely giving bonuses, as we have improved our profitability in the last 2-3 quarters. We will give good bonuses and people will not be disappointed,” WNS group CEO Neeraj Bhargava said.

But with 2009 expected to be a tough year for business, the BPO firms are trying to temper down employee expectations. “We have told employees that this year is going to be difficult, and salary increases will be in a different range,” Mr Bhasin said.

US firms, that outsource jobs to India and other emerging markets, face widespread criticism in that country. The outcry against outsourcing had forced US President Barack Obama to introduce measures to discourage companies from sending out jobs. The US market contributes more than 65% of the revenues of India’s information technology and outsourcing industry.

US companies cut 663,000 jobs in March 2009, taking the jobless rate to 8.5%, the highest in more than quarter century, according to US Labour Department data released on April 3.