Accenture, one of the leading IT services companies in the world, has announced that it will not give pay hikes to its employees in India and Sri Lanka in 2023, except where it is legally required or committed to in some critical skill areas. The company has also reduced the bonuses and postponed the promotions for its staff in these two countries.
In an email to the employees, Ajay Vij, the country managing director of Accenture, said that the decision was taken in the context of the company’s performance, which was lower than planned due to a more challenging macro environment than anticipated at the beginning of the fiscal year 2023.
“Our rewards philosophy is to provide market relevant pay based on skills and location that is affordable for Accenture. Keeping our payroll aligned with the market is essential to the health of our business, including competitive pricing of our services,” Vij wrote.
Accenture reports mixed numbers and weak guidance for FY24
Accenture, which follows a September-August financial year, reported mixed numbers for the fourth quarter and the full year of FY23. The company’s revenue increased by 4% to $16 billion in Q4, but its operating income declined by 16% to $1.91 billion. The operating margin also contracted by 270 basis points to 12%.
The company’s net income dropped by 18% to $1.37 billion in Q4, while its new bookings fell to $16.6 billion from $18.4 billion a year ago. The new bookings were evenly split between consulting and managed services segments, which saw their revenues decrease by 2% and 10%, respectively.
For the full year of FY23, Accenture’s revenue grew by 3% to $62.3 billion, while its operating income fell by 9% to $7.6 billion. The operating margin shrank by 130 basis points to 12.2%. The net income declined by 11% to $5.5 billion, while the new bookings decreased by 2% to $66.8 billion.
The company also issued a weak guidance for FY24, projecting a revenue growth of 2% to 5%, an operating margin of 12% to 12.5%, and an earnings per share of $8.02 to $8.32. This guidance was the second-lowest among the beginning of year guidance in the past 16 years, according to analysts.
Accenture faces headwinds in discretionary spending and macro factors
Accenture’s CEO Julie Sweet said that the company faced headwinds in discretionary spending and macro factors in FY23, which impacted its growth and profitability. She said that the company expects these headwinds to continue in FY24, especially in the first half of the year.
Some of the headwinds that Accenture faced include:
- The COVID-19 pandemic and its variants, which disrupted the business operations and travel plans of its clients and employees
- The geopolitical tensions and trade wars between major economies, such as the US and China, which affected the global trade and investment flows
- The regulatory uncertainties and changes in various markets, such as Europe and India, which impacted the demand and supply of IT services
- The talent crunch and wage inflation in the IT industry, which increased the cost and competition for hiring and retaining skilled workers
- The currency fluctuations and inflationary pressures, which eroded the margins and earnings of the company
Accenture lays off 19,000 employees and freezes hiring
In March 2023, Accenture announced that it would lay off 19,000 employees globally as part of its annual performance review process. The company said that it would also freeze hiring for most roles until June 2024.
The layoffs affected about 2.6% of Accenture’s total workforce of 7.33 lakh people as of August 31, 2023. Out of these, over 3 lakh employees are based in India, which is Accenture’s largest market in terms of headcount.
The company said that it would provide severance packages and outplacement support to the affected employees. It also said that it would continue to invest in reskilling and upskilling its existing employees to meet the changing needs of its clients.