Bigger Hikes, but thats no Satisfaction

The PMs public criticism of corporate CEOs on their
skyrocketing remunerations and conspicuous consumption led to apprehensions
about a ceiling being imposed on CEO salaries. Even as the industry debates on
the ethics and free market forces and rationales, the DQ-IDC Salary Survey 2007
proves that the IT industry has not been impacted by any such socialistic
fervor. And we are not even talking of CEOs here (the top management is anyway
excluded altogether from the Salary Survey), but the rank and file of the Indian
IT industry who unapologetically celebrated the northward movement in their
salaries during 2006-07.

Money: Techs Secular Distribution
The industry average salary growth of 11% across the industry (Rs 6.2 lakh
in 2007) might not look significant when viewed in isolation; but coming after a
year (Rs 5.6 lakh in 2006) when the average salary had in fact dipped by 3% (Rs
5.8 lakh in 2005) the increase becomes significant. Coupled with the fact that
employee base too has been growing around 40% over the last three years, the
salary story reaffirms why IT is still considered Indias sunshine sector.
Otherwise, such explosive manpower growth, especially with massive fresher
recruitments, should have seen salaries going southwards.

average salary grows 11%; salary hike averages19%
3 paymaster are R&D organizations; 7 out of Top 10 are global MNCs
no correlation between salary and salary satisfaction
with more than ten years experience get the maximum hike
age inches up to 28.1 from 27.5 even as companies kept hiring freshers
and the South remain the top techie supplier, but the East is coming up

Hiring of general stream
grads/postgrads climbs more than three points, as industry looks beyond

The average salary hike too has corresponded with the average
salary growth. While between 2005 and 2006, there was a miniscule drop in
average salary hike (from 18.3% to 18.2%) there was a gentle increase in last
years average salary hike (from 18.3% to 18.7%).

Nevertheless, with an overall average salary of Rs 6.2 lakh and
the average salary hike of 18.7% in 2006-07, the IT industry figures were higher
than corresponding numbers for most other sectors in India Inc. (See Go Take
a Hike for an explanation of industry average salary growth vs
average salary hike.)

Unlike some sectors like BFSI where there is a significant
differentiation in salary levels between different companies, the remuneration
picture is much more secular in the IT industry. Though our base of 31 companies
surveyed comprised of IT services players, R&D centers of software vendors,
MNCs, hardware players and even system integrators and resellers, not too much
wide discrepancies were visible across different categories.

Even without sharp contrasts in the salary structures, a look at
Indian ITs top paymasters during 2006-07 throws some interesting data. Seven
out of the Top 10 in the list are MNCs, ranging from behemoths like IBM, Cap
Gemini, CSC and Sun to smaller niche players like Cadence. Nothing surprising
here: MNCs have higher salary structures than their Indian counterparts. The
survey also confirms another popular perception that R&D related jobs pay
better than standard IT services. The Top 3 paymasters in the list, Cadence
Design, Sun Microsystem and Honeywell Technology, are all primarily into R&D
work in India.

While Cadence and Sun are the top paymasters for all employees
with up to ten years of experience, Infosys is more generous with the salaries
of its senior and experienced employees. Along with Cadence, it is one of the
best paymasters for people between 10-15 years experience; and even for those
with more than 15 years experience (those must be the early birds of Indian IT),
Infy pays the most only after Sun. This suggests two things: one, that,
especially for engineers it makes sense to start and build their careers in an
R&D set up, and two, at more experienced managerial level, Infosys salary
levels match the best.

And though companies like Tavant, Aztecsoft and Cognizant are
not amongst the top five paymasters, they still made their way into the top five
in specific experience categories. This outlines the fact that some companies
might not splurge across all levels of employees, but are willing to pay a
premium above the industry average for employees with specific experience who
could be central to their operations.

The Top
Moving up the Bonds
5 Paymasters Across Experience Levels
Salary Hikes

Dont Get No Satisfaction
A secular salary structure across companies also means more volatility in
the salary rankings among Indian ITs top paymasters and the salary levels
associated with them. Only 6 of the Top 20 paymasters this time were also on
last years list: Cadence, Aricent (formerly Flextronics), Globallogic
(formerly Induslogic), CSC, Geometric and Aztecsoft are the survivors from last
year. The rest have either not participated this time or have been displaced
from their ranks. The relatively low positions of Infosys and TCS amongst the
group of Indian ITs top 20 paymasters and the exit of Wipro from this top 20
list are noteworthy.

The #13 position of TCS in the top paymaster table is
interesting, considering that the company topped the list in employee
satisfaction and was #4 in the salary satisfaction index, according to the DQ-IDC
Best Employers Survey 2007. But it is known that Indian softwares top trip,
TCS, Wipro and Infosys, do not have the top salaries.

And though the two surveys have different aims, it would not be
out of context to compare some parameters, especially the salary and salary
satisfaction rankings. That higher salary does not translate into higher
satisfaction level amongst employees is one trend that has emerged in recent
years and these two surveys in 2007 only corroborate this.

Amongst the Top 20 paymasters we have only 14 companies who are
among the top 20 in the salary satisfaction index. And amongst the Top 10, the
number is only seven. The top paymaster Cadence has slipped on the satisfaction
stakes to 10, while Honeywell at #3 is not even in the Top 20 in satisfaction.
This growing disconnect between the salary and level of satisfaction with salary
is a continuation of last years trends. Globallogic too has suffered a
similar fate: while in its Induslogic avatar it was #2 both in the salary as
well as salary satisfaction level last year, it has come down to #5 and #14
respectively this time. The fates of these companies reiterate the changing
times and the rising expectation of todays demanding employees.

As the differences between salaries and salary satisfaction
levels become more marked, an apparently simple way out for companies would be
to raise the average salary bar. Thanks to Indias strength as an offshore
destination most of them have enough financial muscle to undertake such fiscal
revision. But it would be premature for the companies to expect a proportionate
alignment of satisfaction levels. Todays employees have different
expectations, not linked just to salary: designation, domain of work, average
hike trends, multiplicity of hikes, a balanced salary structure (variables and
fixed components) plus efficient tax planninghave all started making a

Gains for (Almost) All
Salaries have grown across all experience levels, starting from freshers,
and that in turn has pushed up the remuneration across all levels. However, the
growth has not been that consistent across all experience levels: for those in
the less than two years experience level, salaries have grown by only 7%, while
for those with more than ten years experience, it has climbed by 13%. The
steep rise in salaries for ten-year plus experienced people should mean that
many companies are doing more lateral hiring for senior employees; however, the
fact that those with 5-10 years in the industry experienced only 4% growth means
that middle level employees were not so lucky.

The less than two years experience level has always have the
highest concentration of people and in 2007 this group too has nudged up its
average pay just a bit, unlike in previous years. The larger concentration seems
to have shifted to the Rs 3-4.5 lakh salary bracket. Companies have acknowledged
the need to revise their entry level salary structures to attract freshers


Those with 2-5 years experience have often been the
“neither here nor there” community and have suffered the maximum,
post-2003, in compensation. The average salary of these professionals, one of
the most crucial segments in terms of execution, had declined a bit in 2006.
That perhaps explained why the attrition rate has been fairly high among this
group. The table seems to have been turned around in 2007 with the average
salary across this group too rising by 13%. With the major concentration of this
group in the Rs 4-6 lakh bracket, this may help in slowing down attrition, up

However, whether this northward trend in salaries could be
maintained in 2008 is an interesting thought, since most offshore IT services
vendors as well as the MNCs have taken some hits on their toplines and
bottomlines this year owing to the dollar depreciation against the rupee. How
the industry evolves and rationalizes the compensation structurewould be
keenly awaited in Salary Survey 2008.

A Bit Older, Wiser
If one way to explain the higher growth in the average salary of people with
ten-plus years of experience was the increase in lateral hiring, the other
factor could be the industry itself growing slightly older in 2006-07. The
Indian IT industrys average age has marginally climbed to 28.1 from 27.5
years. The proportion of employees in the 21-25 years category (primarily
freshers) dropped by five points in 2007, while across all other age groups the
proportions of employees have increased.

Take a Hike

Why is the industry average
salary growth different from the average salary hike?

average salary
is the sum of the
salaries of surveyed employees, divided by the number of employees. This
is calculated for all age and experience brackets, and includes freshers
as well as seniors (the Salary Survey excludes top management).

salary growth
is simply
the growth in this industry average salary for the recent year, based on
the previous years industry average salary. This represents the
change in the industrys average salary.

Average salary hike
is the average of the salary hikes in the workforce. This applies
to only that part of the work force which received hikes within the same
company in their remuneration during 2007. Naturally, this excludes all
freshers and most people with less than a year of experience, as well as
any such employee who has not received a hike in 2007 for any reason. This
would also exclude the many lateral hires during the year: while their
salary levels would have increased in their new companies, they could not
be counted as having received hikes.

While this could suggest a slight reduction in freshers hiring,
the answer might not be so simple. True, there has been a dip in proportion of
employees with less than two years experience, but in actual numbers there has
been a 32% increase in people with less than two years experience. However, the
overall industry has grown by nearly 40% in terms of manpower, with a
spectacular 51% growth in both the 2-5 years experience band as well as those
with more than ten years. That explains why despite the increase in absolute
numbers, the proportion of freshers has gone down; in fact, the previous year
has seen even more aggressive hiring of freshers (their numbers went up by four
points then). And 2007 was just a bit more sedate, following the campus hiring
spree the year earlier.

Many in the industry worry about the impending manpower
shortage. Though it is paradoxical to even imagine that a country of more than a
billion people can ever face this crisis, there is enough reason to worry on
this issue. One reason for this crisis could be the inequitable distribution of
manpower supply across the country. While the South and West have been the
traditional manpower supplier for the IT industry, the north and especially the
east have lagged behind, thanks to the fewer engineering colleges (the south and
west always had a large number of private colleges); but now even the east has
finally realized the need for private engineering institutions. Result: a much
more secular distribution of manpower across the country, according to BES 2007.

The South-and-West Brigade
Traditionally, the four Southern states of Andhra Pradesh, Karnataka, Tamil
Nadu and Kerala have been the biggest manpower contributor to the Indian IT
industry. The fact that most of the Indian IT industry is concentrated in these
states is no accident. However, in 2006, the south brigade lost some sheen when
their contribution to the countrys manpower supply dropped to 34%, from
nearly half the pie, two years. 2007 has witnessed a southern comebackthe
four states together accounted for 40.3% of the total manpower supply. Tamil
Nadu and Andhra Pradesh led the way followed by Karnataka and Kerala. Strangely,
Karnataka after dipping a bit in 2006 seemed to be right back on track this

Its Maharashtra, however, that continues to be the biggest
manpower source for the Indian IT industry. It consolidated its position in
2007, though the same cannot be said about its other western counterparts like
Gujarat, Madhya Pradesh and Goa all of whose share dwindled this time. There was
not much to write home about for Norththough Delhi was the fifth largest
contributor to national manpower, its share dropped down by at least 25%; while
Uttarakhand and Punjab were projected in 2006 as likely major suppliers of the
nations tech force, the reality has been quite different. Uttarakhands
numbers have dropped while Punjab shows marginal increase; others like
Chandigarh, Himachal Pradesh and Jammu & Kashmir have fallen by the wayside.
Haryana seems to be the only one from the north to buck the trend.

The east bucked the trend in 2007. Most of the states including
West Bengal, Orissa, Assam and Bihar increased their share of the national tech
force in 2007. In fact, Bihars growing contribution to the IT manpower was a
welcome change from the popular perception about the state. And the growing
importance of the east reinforces the general belief about the regions
intellectual prowess; it was probably just the lack of enough engineering
colleges, thus far. And once that has been partly addressed, things are better
on the eastern front.

Engineering graduates, armed with either B Tech or M Tech
degrees, continued to rule the roost in 2007. Nearly 56% of the IT industrys
workforce was constituted by engineers, up two points from the previous year; in
fact, the number of engineers, especially M Techs, has been on the rise for last
three years. While this is now common knowledge, what is interesting is that
graduates and post graduates from general streams are being increasingly hired
by the industry. In fact, majors TCS and Infosys have implemented specific
programs to inculcate in these graduates skill-sets similar to the
non-engineering brigade hired. And the perception that more MBAs are now going
into the financial services companies is corroborated by the dip in their
numbers among the tech workforce.

Six Figures, Six-Day Week?
As the Indian IT industry grows older by another year and completes a year
touched by dollar depreciationand heads into more–it worries about how far
northward salaries would go in 2008. And the Indian rupee. Both have been
squeezing margins, and India-based tech companies have been looking for a way

One answer theyve been toying with is moving out from a
five-day working week, the norm in the industry enjoyed by its million-plus
professionals. A few are already trying out a six-day week, selectively, to
offset the impact of the rupee appreciation on their margins (by increasing the
number of billable hours). A few companies such as Wipro have reportedly asked
business unit heads to tell their teams to expect a six-day work week (probably
with additional payment) on some new projects. Thats unlikely to be echoed by
the MNC captive units: a five-day week is a strong part of their culture. On the
other hand, theyve also adopted a high degree if competitiveness on the HR
front, so you never know.

Whats clear is that these are most interesting times for the
HR folks of the tech companies, and the next BES 2008 and the Salary
Survey in 2008 are sure to throw up yet another round of upsets and surprises.

Rajneesh De

Graphix: Paras Jain

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