Human Resources: The Year Of The Freshers

The largest impact of a booming economy and a steadily growing IT industry is

on the job market. Last fiscal, the IT industry which includes both export and

domestic, added 741,000 people, an overall growth of over 16%.

TCS closed the last fiscal at a headcount of 66,480 employees. TCS's gross

and net recruitments at 27,377 and 21,140 respectively are one of the largest in

the industry. TCS is likely to add another 30,500 people this fiscal. Satyam

Computers added 7,899 people taking its FY 2005-06 total headcount to 28,694.

Patni made 2,154 new hires of which over 35% were lateral hires. Sasken largely

concentrated on lateral hires.

Freshers, By Choice



A powerful trend in recruitment last fiscal was the intensity in fresher

hires. TCS made13,776 fresher offers which was over 65% of the net recruitments.

One of the largest recruiter of freshers this year was Infosys with 75% of the

new hires being freshers. Nearly 65% of Patni's recruitments were freshers as

well.

The rise in fresher recruitments is driven by multiple factors. Companies

prefer to train and create specialized talent pool right from scratch. It is

also economical to tap into the huge resource available, to meet the manpower

crunch in the industry. And it operates as a powerful metric to reduce average

age and salary cost.

There are pitfalls to hiring freshers as well. Deals are becoming larger and

more complex. Any slippage in delivery within a competitive offshore space could

prove costly. The risks can be countered by increasing bench strengths, longer

training cycles and greater use of shadow resources such as an un-billable

person who can learn on the job.

Foreign Recruitments



TCS increased foreign hires from 3.5 % last year to 6.5% this year. The

majority, if not all, of its HR people are local recruits in places like

Hangzhou, Uruguay, Budapest, among others. Today, 6.5 % of TCS's workforce

originates from 52 different nations. Infosys will see over 100 graduates from

US universities join the company in India this July.

The industry average of fresher recruitment is around 60%. In case of smaller companies, this stood at 35-40% last year

The burgeoning growth of the IT and ITeS industry saw companies expand

operations in newer towns and cities and the nature of work gravitated to

higher-end of the value chain. Pressures on talent and profitability increased

in 2005 and companies looked at ways to establish competitive advantage.

Organizations created progressive practices to support continuous development of

their employees. Movement to tier-2 and tier-3 cities has expanded the talent

base, but on the other hand, the shift from low-end business processes to higher

value knowledge-based processes has amplified the challenge of hiring

specialized manpower. Outsourcing companies are now falling prey to increasing

wage costs for specialized skills. The need to constantly align reward practices

to the market continues.

Crunching Numbers



The average growth in compensation levels last year was roughly 14-15%. This

is fairly high, by industry standards. Indian compensation levels have been

rising in the last couple of years. In fact, the declining cost arbitrage is a

cause of concern for the industry. For TCS, the average compensation for an

India-based employee is between 11- 15%, while for the other geographies is

between 4-5%. Infosys increased offshore salaries by 14-15% and onsite salaries

by 3%. The average compensation at the entry was around 10%. However, companies

like Infosys and HCL Technologies hiked entry-level payouts by around 15%.

Google has been most generous when it comes to the size of the offers during

campus placements. The median offer received at the IITs was around Rs 4 lakh,

while it was around Rs 2 lakh for the regional engineering colleges.

Salary structures are a derivative of multiple factors: skill, complexity,

experience, productivity goals and special domain or process expertise.

Organizations are striving to align their compensation with their business

strategy by linking rewards to these critical factors across all levels. There

is a growing trend towards differentiated total rewards practices based on

specialized skill and complexity. Last year, the IT industry paid premiums for

specialized skills at the hiring stage and the quantum payout was often left

upon the recruitment manager's discretion. Fixed pay ranges were devised and

employees with hot skills were placed in a higher quartile within the same

range. Other methods adopted by the industry to retain such employees were hot

skill allowances, sign on bonuses and frequent salary revisions.

Performance-based pay is gaining ground in the industry. There has also been

a continued trend of a cash-heavy compensation. Organizations in this sector are

increasingly designing compensation structures, which are tax friendly and allow

employees to exercise their choice of benefits through a single flexible

allowance. However, this may change this year if the stock market continues to

put up a shaky performance.

The compensation differential between MNCs and Indian companies in the IT

services space is marginal. However, MNCs doled out as much as 30% more on an

average as compared to their Indian peers in the product development space.

Relevant skill sets were also inadequate in the R&D segment. Another

interesting differential came up in the CEO salary category. In IT services, the

top companies that account for nearly 80% of the business are promoter driven,

with TCS being the only exception. CEO salaries in such companies do not reflect

the trend in the industry. However, this differential was anything between

50-100% when it came to mid-sized companies. 

Skills that Matter



The demand for skill sets remained more or less unchanged last year. Java, C

and C++ stayed at the top. For databases, it was largely --Oracle while SQL was

the preferred choice in the Windows environment. Specific skill sets such as

enterprise package implementation expertise, data warehousing and J2EE have

gained prominence in the recent past. In the OS space, it was largely Unix and

its different forms that ruled the roost. There has also been a high demand for

.NET and for the wireless domain. Mainframe is also back in action.

A segment that is expected to attract specialized skill sets this fiscal is

remote infrastructure management.

The Present and the Future



The IT industry opened its doors to plain science graduates for application

support, testing and maintenance. There are two reasons for this: vanilla

testing and maintenance jobs do not require engineers; the cost of hiringÂ

science graduates also works out to be far lower.    

A significant impact of the turbulent world economy and high oil prices could

adversely affect the overall sentiments this year. Average increments, which

have gone up in the last two years, could slow down this year.

Bhaswati Chakravorty



bhaswatic@cybermedia.co.in