Infosys' Lucrative "Deferred Bonus Scheme"

How do you retain the creamy layer at the top in a highly competitive market, especially when you have put your storied ESOPs on the back-burner? Infosys Technologies has come up with a lucrative ‘deferred bonus scheme’ for senior executives in the associate vice-president, vice-president and senior vice-president grades. The payouts are impressive, ranging from $20,000 (Rs 9.2 lakh) to $1,25,000 (Rs 57.5 lakh) per year.

Deferred bonus payouts to range from Rs 9-57 lakh per year

Bonus amount to add 38-100% to salaries of top executives

Variation of 25% for employees abroad

nfosys expects an expenditure of $4-4.5m (Rs 18.4-20.7 crore) on the scheme in the first year. As most people in Infosys in this bracket earned between Rs 24 lakh and Rs 54 lakh last year, the bonus amount translates into an addition of between 38% and 100% to their salaries.

The company’s director and head of human resources, TV Mohandas Pai, said: “The scheme will cover between 160 and 180 staff, including directors... We have introduced this scheme as an incentive for the senior executives and also to ensure retention.”

He added, “This is not linked to ESOP. But after junking our ESOP, we had nothing for our employees. So this has been introduced effective April ’06.” There will be a variation of 25% in the computation for the bonus scheme for people in India and those abroad. For example, at the senior VP level, the India-based person will get $100,000, while those abroad will get $125,000, mainly to make allowances for taxes overseas.

To be eligible for the deferred bonus scheme, an employee needs to have worked with Infosys for a minimum of a year and the first year bonus will accrue at the end of the second year. The latter is where the ‘deferred’ and retention aspect of the scheme kicks in. Dispersal of the bonus is based on performance and a few other matrices.

At Infosys, its ESOP programme, which made millionaires of thousands of its employees, was for long a powerful motivator to join the company and stay there. But issues relating to expensing options combined with the sky-high prices of IT scrips took most of the lustre away from the scheme. Infosys decided to keep in abeyance its ESOP a while ago. Restricted stock units are in vogue now, with Wipro and iGate adopting it. But since it comes with a hit to the P/L account, it hasn’t caught the general fancy.

Original story