As startups and IT companies take stock of the business impact from the coronavirus pandemic, industry members say companies are taking some tough calls on hirings and bonuses.

According to a LocalCirlces survey, 71% startups and SMEs feel they are now facing lower demand for their products or services. The survey shows that this trend could lead to tough cost-cutting measures at these companies.

Around 63% of startups and SMEs surveyed said that they would cut spending by lowering employee costs, discretionary expenses, and exiting non-essential supplier projects. Almost 17% said they will freeze incentives and benefits for a year and another 17% said they would reduce headcount based on performance.

Hiring across several companies has been put on hold, and budgets for CXO hires have been halved, according to multiple talent and recruitment consultancy firms.

Kamal Karanth, cofounder of XPheno that works with GICs and IT services companies for recruitment, said that at least 50 percent of full-time hirings across their clients have seen a freeze in the Rs 15 lakh to Rs 50 lakh salary range.

Bonuses and salary hikes have also been put on hold in the IT sector, industry sources said.

“Right now, we have only one priority of employee safety and well-being. All salary-related discussions are on hold,” said CP Gurnani, CEO of Tech Mahindra.

Transearch India, a search organisation that works on placements of CXOs and VPs across consumer internet startups, said that budgets have been halved for these positions and there’s a freeze on 20 to 30 percent existing mandates with the company.

“Since more than a week, we have not had any new requests and even in existing mandates, about 20-30% have been frozen and we expect this to go up in the coming weeks,” said Ashish Sanganeria, partner for digital practice at TranSearch India.

“We have seen salary offers for CTO and other CXO levels in some startups being slashed by half,” he added.

However, HR tech companies such as Spottabl, a recruitment tech platform for startups, said that there has been no ‘freeze’ on hirings at startups. In fact some sectors have witnessed a spike in hiring for high-impact roles.

“High-impact roles such as tech/product, business finance and digital are seeing a spike in hiring demand, especially in sectors such as health tech and pharma, B2B and SaaS,” said Vani Shri, CEO, Spottabl. The platform helps startups find talent across candidates with two to three years of experience till the C-Suite level.

"Only roles such as branding, marketing and growth, which need big funds around those functions, are being relooked at," she added.

A Nasscom executive said it was too early to report any impact on hiring and on bonuses or salary hikes.

“The appraisal cycle in the IT sector happens in the May-June period, so there is still some time for that. But it will be a tough year for the sector given that new projects and new deals will be on hold,” the person said, requesting anonymity.

IT sector analysts have estimated that the sector will see an impact on revenue for the March quarter and the first quarter of the next fiscal.

Kotak Institutional Equities last week said in its report that they were cutting revenue growth estimates for the large and mid-tech IT companies by 2-4 percent and revised growth forecast for the whole sector to 3-8 percent for FY21.

First Published:Mar 20, 2020 5:48 PM IST