A New Paradigm: Money Takes a Back Seat

Hikes and perks took a beating as IT’s average salary grew a mere 7% to Rs 4.6 lakh per employee. But IT professionals may be learning to live with the new paradigm. An interesting sidelight–in a year of intense hiring at the entry level, the average age of the industry fell from 29 years to 28.1 years. The third DQ-IDC IT Salary Survey 2003 looks at the salary trends in the industry and how these have changed over the last year

This is definitely beginning to look like old economy. Hikes are down to less than 15% on an average; perks took a big beating and salary bands moved down in almost every grade. To count the blessings though — hiring was back with a vengeance as the Top 20 IT Best Employers alone added a whopping 28% to their staff strength in 2003 compared to just 10% the year before.

This had its fallouts. Most of the hiring happened at the entry-level and with more companies competing for the just-out-of-college graduates, average entry-level salaries increased by about 9% to Rs 3.3 lakh. At the other end of the spectrum, those with more than 10 years of experience got the largest salary hikes in both appraisal cycles during 2003.

Needless to say, the middle management took the brunt— employees with 2-5 years of experience got the lowest salary hikes and their weighted industry wide salary average grew by just under 7%. Employees with 5-10 years in the business got the second highest salary hikes but their weighted industry wide average salary actually fell marginally from Rs 9 lakh to Rs 8.94 lakh. Mostly, people were glad if they could jump jobs without a salary cut.

There are signs though that IT employees are learning to live with this kind of salary environment. After the Year of Layoffs in 2001, the mere fact that the industry was back into hiring mode has come has a huge relief. This showed up in numerous metrics. Attrition is down to its lowest ever. And though overall satisfaction with salary in the IT industry was lower than the BPO industry, money is no longer a major motive for joining a company. Only 10% of those surveyed said salaries were the key joining factor. For more on the third DQ-IDC IT Industry Salary Survey, read on…

Salary distribution for experience of less than 2 years



Despite the heavy hiring, salaries of entry level programmers across the industry increased by just over 9% to an average of Rs 3.3 lakh per annum. (For specific salary hikes during the last two cycles see tables). Within the group though, there has been some shuffle. The proportion of people getting less than Rs 2 lakh and more than Rs 3 lakh has increased while the proportion of employees in the main salary band of Rs 2 lakh to Rs 3 lakh has decreased. For instance: the percentage of employees getting less than Rs 2 lakh went up from 13.8% to 15.2%; the percentage of employees getting over Rs 3 lakh increased from 19.3% to 35.7%; while the percentage of employees getting between Rs 2 lakh to Rs 3 lakh decreased from 67% to 48%. Even so, this remains the most predominant salary band.

Salary distribution for experience of 2-5 years



This experience group has shown the lowest satisfaction on salaries and compensation. Here’s why: due to the large influx of new

comers, there was a lower proportion of employees in the 2-5 years experience group this year than last. Despite this, average salaries grew at a much slower 6.8%. In 2002, most employees (48%) had got between Rs 4.1 lakh and Rs 6 lakh per annum. In 2003 that band became lower as most employees (about 45%) got between Rs 3 lakh and Rs 4.5 lakh per annum.

One big reason for this is internal restructuring within this group. At one end, some employees who were previously classified as <2 years experience have moved up to the 2-5 years experience level at the lower end of the salary band. As a result, a good 7.4% of all employees in this group were getting less than Rs 2 lakh in 2003 compared to just 2.6% the year before.

Because of minimal or no salary hikes, the proportion of employees in the higher band of over Rs 6 lakh p.a. has meanwhile shrunk drastically (from 18% to 4.5%).

As a result of both, the middle band of employees with 2-5 years experience getting between Rs 2 lakh

and Rs 6 lakh has expanded significantly from 79% to 87%. No surprise then that this experience group has shown the lowest satisfaction on salaries.

Salary distribution for experience of 5-10 years



In many ways, this experience group has been among the worst hit and was the only group where average salaries across the industry actually fell by 0.7% during the year. In 2002, 40% employees in the group were getting between Rs 6.1 lakh and Rs 9 lakh per annum. In 2003, that band moved down with 53% getting Rs 3 lakh to Rs 6 lakh per annum. This showed up across all the salary bands. The proportion of employees getting less than Rs 3 lakh increased drastically from 3% to 15%; those getting Rs 3 lakh to 6 lakh was also up significantly from 16% to 53%; while the proportion in salary band higher than Rs 6 lakh were significantly down.

There were three key reasons for this: the upward movement of some employees from the 2-5 years experience group who would have come in at lower salary bands; no significant salary hikes within this experience group; finally and most importantly, the increasing variable component in salaries linked to team or company performances. Most companies during the year increased the variable component of employee salaries drastically (See DQ Best Employers’ Survey August 31, 2003). Often these would be linked to workgroup or company performance on a quarter to quarter basis. So much so that often employees complained they weren’t sure of how much salary they would get month to month.

Actual salary vs satisfaction



Often, the actual salary given has little to do with employee satisfaction on salary itself. Sun Microsystems is among the best paymasters in the industry but has among the least satisfied employees on this count. On the other hand, RMSI is among the lowest paying companies but has among the highest satisfaction on salary and compensation. Reasons for this disparity can vary. A key defining factor being the nature of work–if interesting, it can make employees feel far more satisfied at much lower salaries and vice versa. Other reasons include things like increased work load that can make employees feel they are not being paid enough for the work they do. Overall though, two key trends emerged: in this environment marketing professionals are not just better paid but more satisfied on their salaries and compensation; and the senior most employees with more than 10 years experience are having a better time of it than their juniors.

Salary distribution for experience over 10 Years



This experience group might have had the easiest time in a way. It got the highest salary hikes and showed the greatest satisfaction on salaries and compensation. Unfortunately, data available between 2003 and 2002 is not comparable. For one, 2002 averages included the top management like marketing chiefs based out of the US who were then drawing anywhere between Rs 2 crore to Rs 3 crore every year. As a result, last year’s data is a little skewed in comparison. For another, the detailed break up of employees in the 10-15 years and more than 15 years experience groups was not then available. Overall, the major salary band in this experience group was in the Rs 10.1 lakh to Rs 15 lakh range. Within that though, a further break up is available. Average salaries for those between 10-15 years stood at about Rs 15 lakh while those with more than 15 years experience stood at Rs 21 lakh. At the other end of the spectrum, senior most employees with more than 10 years of experience actually got the largest salary hikes. However that is not reflected in the changing salaries here because the 2002 averages of this group included top management salaries that could range from Rs 2 crore to Rs 5 crore for marketing heads.Overall, average salaries including all experience group increased 7% from Rs 4.3 lakh p.a. in 2002 to Rs 4.6 lakh p.a. in 2003. Compared to 2001, that average is up 17% from Rs 3.9 lakh per person per year.

Employees in the industry by experience



It was a year of intense hiring. The Top 20 Best Employers of the industry alone increased headcount by 28% during the fiscal compared to just 10% the year before. More importantly, most of the hiring was at the entry level. Lateral hires–the big thing of fiscal 2002–were put on hold as code soldiers came on board for the increasing number of projects that the IT services sector was now servicing. Not surprisingly therefore, the proportion of employees with less than 2 years of experience went up by nearly 4% even as the proportion of second level programmers and project heads decreased marginally. There were no major changes at the top as the proportion of employees with more than 10 years of experience remained more or less the same.

How young?



Age: As the industry–specially the IT services sector–hired new comers at a hectic pace the average age of the industry has fallen, instead of rising as it did last year. Much of this came from the significantly higher proportion of less than 25 years olds in 2003 (28%) com-pared to 2002 (19%).

Salary hike by the company



The hikes are coming in but growing smaller and smaller with each passing cycle. Half the industry gets less than 15% increment last cycle. The only constant–employees with more than 10 years of experience get the highest jumps. As hikes get increasingly linked to company performance, the number of people unable to specify their exact hikes gets higher.

Educational background



The survey had not specifically captured the proportion of vanilla graduates in the industry in 2002 so a one-to-one comparison is tough. However the lower proportion of engineers and MBAs and the higher proportion of MCAs is interesting. Incidentally, the IT industry seems to have a lower proportion of management graduates compared to even the BPO industry.

Perks and benefits



The percentage of employees eligible for perks has gone down for the second year in a row. This is only partly accounted for by the newcomers. Most perks were down with just two key exceptions being: hospitalization cover, leave encashment and annual foreign trips (up only marginally and more business related).

Satisfaction on the appraisal system



Satisfaction with the appraisal system has been found to be closely linked to employee satisfaction on salary itself. This is not surprising considering that most increments and promotions happen during appraisal time. As a result, the two rankings on salary satisfaction and appraisal satis-faction often are very similar. The only exception here, Sun Micro employees seem more satisfied with their appraisal systems than with their salary

package

The state they belong to



The four southern states continue to contribute most to the IT industry pool accounting for 59% of all employees last year compared to 47% the year before. The big jump came from Andhra Pradesh even as the proportion of employees from Tamil Nadu and Kerala went down marginally. Other key states where the percentage of IT employees went down were Delhi and Maharashtra–both of which incidentally, are becoming very active in the BPO industry.

Sarita Rani in Bangalore additional

inputs from Tirthankar Sen, IDC India

Methodology 

The DQ-IDC HR and Salary Surveys were carried out in six major cities across the country —

Mumbai, New Delhi, Chennai, Kolkata, Hyderabad and Bangalore. The first two parts of the survey — IT’s Best Employers’ Rankings and the BPO Employee Satisfaction Survey were carried earlier in the August 31st and September 30th issues respectively. For the IT survey, questionnaires were sent out to 200 companies of which 44 participated in the second round which consisted of a short listing of companies based on HR parameters. In the third round 26 companies were short listed and a large scale face to face survey was conducted among 1000 employees from these companies. Salary survey data and profiles of the IT industry are derived from these employee interviews. 

For the BPO salary survey, 15 companies were short listed and face to face interviews down with 544 employees from these companies. BPO Salary data and profiles are based on these employee interviews. A word of caution: the BPO survey could not include all the large employers and therefore all company rankings include only those that have in fact been surveyed.