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ImageIndia's second largest software services exporter Infosys announced it would pay lower discretionary pay. However, Infosys CEO Kris Gopalakrishnan emphasised that it is not a pay cut but a cut in variable pay.

He said that in the wake of the global economic downturn, the company would pay a lower variable pay to the senior management. "It is not a pay cut. The performance of the company is slow, so the variable pay is low for senior management. The executive board members can lead by example. Discretionary pay is going to be lower this time."

The move is likely to hit the senior management most as the variable component is as high as 50 per cent of the total pay packet of Infosys' senior executives. However, in the case of the junior- and middle-level personnel, this component is around 20 per cent of gross salary. The variable pay is linked to revenue growth and operating margin of the company.

Earlier, the company said that the annual salary hike, given in April every year, might be in single digits this year as the company was expecting the slowdown in the IT services to continue. "Owing to slow performance, the increment to employees will be minimal this time," Gopalakrishnan said.

The company also said that going forward, it is going to be 'selective' regarding recruitments and the company would only recruit for specific requirements based on business demand.