Reality? Not Anymore!

SARITA RANI in Bangalore with YOGRAJ
VARMA in New Delhi

Slowdown! Slowdown! Slow-down! This has been the theme for
some time now at all software parties. Times are slow for the industry, slower
for companies and slowest for software professionals, particularly excruciating
for a breed used to life in the fast lane. Business is down, contracts are being
renegotiated and aspirations of US immigration are dying a sudden death.

In such grueling times, is it politically correct to ask companies that
burning question–what do your pay your employees? Probably not, but we
reasoned that it is only in lean times that companies go on the penny-pinching
mode–sure, they wouldn’t be saving on paper clips or reusing envelopes and
plastic cups, but there would surely be a noticeable impact on perks and
increments, foreign trips and high-speed car purchases. It was this thought that
drove Dataquest to get into the act and carry out a compensation survey in India’s
top software companies. Apart from talking to chiefs of HR departments, a
perception survey was also conducted among employees in these companies.

Coming back to the basic question–how much do software professionals make?
A simple answer, that still holds good–plenty. In these days of recession,
there is also another question–have salaries been hit by the downturn of the
past few months? Short answer–NO! But yes, the exponential rise in salaries
that industry saw in the last few years has sobered down. No one is facing
pay-cuts, but increments and perks are definitely south-bound. And for some time
at least, those fantastic pay hikes of 50-100% are out.

The tables and charts in the following pages paint a detailed picture of what
salary packages in the Indian software industry are beginning to look like. But
before getting into that, here are some snapshots:

  • Software professionals with 10
    years’ experience in a Top 10 company make, on an average, a little over
    Rs 11 lakh a year.

  • The top-end
    salary that DQ encountered was for a vice-president in one of these
    companies–Rs 4 crore per year! But hang on, he is based in the US and this
    is the rupee conversion of his total package.

  • At the lower and
    middle levels, perks are all but negligible. It is only at very high levels
    that perks actually start having a meaningful presence.

  • There is a freeze
    on increments across the board. While no one is talking about it, harsh
    times have ensured that no one is complaining about it either.

Having said that, it has to be admitted that without doubt,
software professionals are among the highest-paid in the country. Nowhere else
do graduates in any stream command such salary levels. Entry level salaries in
the software sector range from between Rs 1.25 lakh and Rs 2.4 lakh per annum,
or between Rs 10,400 and Rs 20,000 a month. Within two years, this can go up to
between Rs 2.4 lakh and Rs 4.5 lakh a year (Rs 20,000-37,500 a month).

For those with experience of between two and five years,
salaries range from Rs 3.1 lakh to Rs 5.9 lakh a year (Rs 25,800 to Rs 49,166 a
month). And for those with five to ten years of experience, the figure jumps to
between Rs 4.7 lakh and Rs 13 lakh a year (that’s Rs 39,000 to Rs 1.08 lakh
per month). Above that experience group, salaries vary widely depending on job
profile and company. The survey also determined that for more than 10 years of
experience, salaries range from Rs 8.5 lakh to Rs 18 lakh a year for the middle
management, from Rs 14 lakh to Rs 25 lakh for senior management, and from Rs 20
lakh to Rs 40 lakh a year for top management.

These are interesting numbers. In 1995, according to another
DQ Salary Survey, those with under three years’ experience received pay
packets of under Rs 1 lakh a year. Today, that figure is even below the
entry-level salary, which ranges between Rs 1.4 lakh and Rs 2.4 lakh. Six years
down the line, this jumps by 100-200%, far surpassing commensurate inflation
figures of around 10% per annum. In the 1995 survey, MNCs were the hot stop spot
for software professionals, with salaries offered there being well above the
average. Today, it is Indian companies that top professionals head for.

Apart from gross salaries, we also came across some
interesting trends that have emerged–a vast array of perks and benefits that
have now become standard, a growing representation of women in the software
sector, increasing number of performance-linked incentives, among them stock
options, and of course, on-the-house overseas trips.

The perks

In the past few years, software companies have been getting
increasingly innovative with their employee perks. Barring a few, almost every
respondent said he or she was entitled to at least one overhead benefit. And
almost a third (33%) said they were entitled to five or more perks including
things like children’s education. Such overheads are now becoming routine in a
lot of Indian industries, and especially so in the software sector where
attracting and retaining good talent is an issue.

Till a few years ago, company-sponsored life or medical
insurance plan was a novelty. Now, it is almost routine–84% of those polled
had insurance cover paid for by their companies. Nearly 45% had companies
providing them with subsidized food. Close to 40% were eligible for ESOPs, while
housing loans and training sponsorships stood at par, with 39% saying they were
eligible for both. Following closely with a 26% following were employees
eligible for car loans and club memberships.

It is important to remember here, however, that these are
average figures. In companies like Wipro, for instance, 75% of the employees are
covered under the ESOP programme.

The most recent employee ‘benefit’ to enter the list is
‘overseas trips’. Almost 15% of those polled were either eligible for or had
been on company-sponsored trips abroad. More than any thing else, this is really
where there is a huge scramble for the pie. A foreign trip has multiple
benefits: it looks good on the CV, it brings in a lot of extra money and it
massages the ego. It’s the software industry’s new designer label: been to
the US.

The hikes

Salary hikes in the software industry pretty much follow the
technology route these days–upgrade or lose–with almost the same lifecycle.
This is where reality has set in. Over 30% of those polled had received between
11% and 20% increases in salary at their last appraisal. Another 20% received a
21-30% raise, while a whopping 14% had upped their salaries by more than 40%. In
a previous salary survey, it had been found that IT professionals were jumping
jobs for a 25% jump in salary. The software industry’s aggressive pay hike
policy is one of the ways of dealing with this stream of employee attrition.

What is more interesting, however, is that Indian companies
are increasingly beginning to follow the US model of performance-linked
salaries. At the entry level, 90-100% of the ‘cost to company’ comes as
fixed component of the salary. However, as one moves higher up the pecking
order, a larger portion of the salary gets linked to achievement of targets. In
Wipro, for instance, almost 40% of the annual package is performance-linked,
while in the case of Cognizant, it is around 50%.

The current downturn, however, has sprung up some interesting
uses of this concept. Despite a 30% growth projection for the next year, Infosys
has not put a cap on salary hikes. Instead, it has linked 70% of the hike to
quarter-on-quarter performance for its employees, which means that a programmer
may get a 50% hike in salary, or more. Of this 50%, 30% will accrue to him every
month. The remaining 70% is on an ‘all or none’ basis–if targets are
achieved at the end of a quarter, he gets the rest of the monies, if they are
not, he gets zilch. Wipro has a similar plan–called the quarter performance
linked compensation, the company is planning to pay a higher proportion of the
pay as QPLC.

One of the most encouraging trends that emerged from the
survey was the growing presence of women in the software industry. Almost 30% of
the Indian software tribe is now comprised of women–probably the highest
proportion of any organized sector industry. Pentamedia (with 40% female
employees) and HCL Tech (with 35%) lead the pack.

Indian software professionals are called by many names these
days: India Inc’s brand managers; new India’s economic ambassadors; the tech
era’s brat pack. Whatever you call them, though, read on to see the trends in
the top software companies of the country.

Bangalore with YOGRAJ VARMA in New Delhi

Cost to company across different experience groups

The million-dollar question: which companies are the better paymasters
amongst the top 10 Indian software exporters? According to the employees survey,
HCL Technologies was the number one averaging at Rs 3.67 lakh, closely followed
by Wipro and NIIT at Rs 3.56 lakh and Rs 3.5 lakh respectively. At the bottom of
the ladder was the Chennai-based Pentamedia with an average salary of Rs 1.59
lakhs and another group company Pentasoft at Rs 2.17 lakh. The same is also
reflected in the forms submitted by the companies. HCL Tech again tops the list
with a salary in a range of Rs 2.6 lakh to Rs 4 lakh for those less than two
years of experience, closely followed by Wipro. Of course Wipro takes over as
you move up in the hierarchy. For 2-5 years of experience, Wipro offers anything
between Rs 3.4 lakh to Rs 7 lakh as compared to an average of Rs 3.1 lakh and
5.9 lakh respectively.

Salary’s fixed component as percentage of cost to company

you thought the software professionals escaped the taxman’s net with a huge
amount of perks, well …… not really so. At the lower level, a major
proportion of the salary is in the form of fixed components. In the employees’
survey, Dataquest found that on an average, NIIT topped the list with an average
of 91% as fixed components, while Pentasoft scored the least with just 55%. In
terms of number of years and experience, while those with less than two years of
experience got about 79% of the salary as fixed, it moved down to 75% in the
plus five years range.

Of course a no brainer, as you rise in the hierarchy, your fixed
component decreases. This is where performance linked bonuses shoot up. For
example, in Wipro, for the top management and senior management, as much as
30-40% of total cost to companies is in the form of performance linked bonuses,
while for Chennai-based Cognizant it’s in the range of 40-50%.

What are the perks?

Not much surprise here! Life/medical insurance and subsidized
food top the list. Barring Pentasoft, all the other top 10 software companies
have more than 80% of the employees getting these benefits. In ESOPs, while the
average was pegged at 40% of all sampled employees participating in the ESOP
scheme, Satyam and Infosys top the list, with 88% and 77% employees being
eligible for the scheme. At the low end it was NIIT with just 7% followed by TCS
with 14% of the sampled employees. The only other company above the average mark
of 40% was HCL Technologies, with 70% employees being eligible. In terms of
foreign trip, Wipro topped the list. Of every three software professionals in
Wipro, one would make it to foreign shores. For the second spot it was TCS. At
the other extreme, Cognizant and Pentamedia had 3% employees qualifying for
foreign trips. While Cognizant scored very low on the foreign trip account, it
made up in training sponsorships for its employees. A notch below HCL’s 58%,
it was pegged at 53%. At the bottom were Pentamedia at 18% and Pentasoft at 21%.

Male bastion

of the software professionals are male compared to one-fourth females.

Clearly, the males dominated the bastion. At least in the majority of the top
software companies. Infosys emerged the torchbearer in transparency, while NIIT
refused to participate on grounds of company policy. The top honor goes to
Pentamedia with a 60:40 male female ratio, followed by HCL Tech with a 65:35

Average salary hikes

you think that software salaries are stinky high, appraisals twice-thrice a year
with about 50-100% year- on-year hike, think again. While 79% of the respondents
said that salary revisions were only a one-time affair, about 18% reported the
half-year revision phenomenon. Of course, a lucky 2% were in the quarterly
brackets also. In terms of how much? For about 56% of the employees sampled, the
hikes were below the 30% mark. Among the toppers in employee perception were
Pentasoft and Pentamedia, with 36% average salary hikes year on year.

The great divide: Urban domination

always knew that the majority of software professionals came from the
non-metro/state capital regions. Now we have the data to prove that. Employees
from the urban areas dominate the software scene. A whooping 55% of the sample
belongs to the non-metro/state capital region. Narrow it down to the 2-5 years
experience group, the backbone of the IT industry, and about 65% of the sampled
resources were from the urban towns. Even in the top three companies, the
percentage was above 60. Barring Pentamedia, which sourced nearly 73% from
metros, all other top 10 software companies’ manpower came from the urban
towns ranging from 44% at Satyam to 79% at HCL Technologies.

State of origin

No marks for guessing for the state producing the maximum number of software
professionals; it’s Tamil Nadu. Of the sample size, about 37% employees
belonged to Tamil Nadu. Also in the plus five-years category, the percentage
increased to 40%. While the numbers are apparent in the Chennai-based companies
like Pentamedia, Pentasoft and Cognizant, Tamil Nadu as the state of origin is
high even in the Noida-based HCL. While the local dominance is apparent in most
of the companies like Wipro in Karnataka, Satyam in Andhra Pradesh and NIIT in
Delhi, there are a few exceptions. Like Uttar Pradesh being the next most
prevalant home state of software employees. In Infosys, the random survey showed
a high skew towards UP with 37% of the sample size belonging to UP. The same was
the case with TCS which had 29% of professionals in the sample size coming from

Fixed salary components

much difference across the experience spectrum. While employees with two years
and less experience have about 52% of monthly salary, in the plus five year
experience category it falls down to 49%. The other difference was the
increasing bonus level with growing experience. While annual bonus is pegged at
13% for employees having less than two years of experience, it increases to 14%
for the 2-5 years range and about 17% for the plus five years category.
According to the employees’ survey, Wipro had the lowest monthly salary pegged
at 38% but the highest bonus component at 19%. At the other end of the spectrum
was Infosys with 61% in monthly salary and 9% in bonus.

Education groups

a tip for budding software professionals: if you are aspiring for a job in any
of these premier companies, try to get an engineering degree. Majority of the
sampled employees, about 59%, had a BTech or BE background. Still skeptical of
the training institute in your neighborhood? Try this: of all the employees we
spoke to in the top software companies like Infosys, TCS, Wipro and Satyam, we
did not find a single PG Diploma or graduate. The clear edge was for BTech or BE
students with Satyam having about 90% of them, followed by Infosys at 86% of the
polled employees. The only exception to this rule was Cognizant with a mere 5%
employees in the above mentioned categories. Before your think there is still
some hope, here’s the rude shock. About 75% of the employees were in the MSc/MCA

Experience grouping

happens to the software veterans who have over 10 years of experience?
Interesting question! The possible answers–turn entrepreneur or migrate to the
US. In terms of experience, the top companies are dominated by professionals
below five years of experience. Companies like Pentamedia are dominated by the
below two years experience level, accounting for over 60% of their software
workforce. At the other end of the spectrum is Wipro with only 26% of its
software employees in the sub two years experience category and about 60% in the
2-5 years experience group. Satyam and Cognizant lead the pack in the 5-10 years
experience group with 21% and 20% respectively–much above the average of 15%.

Attrition rate

is on the rise, and with the slowdown it can only worsen. The only exception was
Wipro, where there is a reversal of trends with the attrition falling by about
3%. Yet, with the lowest attrition rate among the sampled companies was
Pentasoft at 6% as compared to the previous year’s 3%.

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