Remuneration Blues

The IT industry in India muscled its way to become the numero uno growth
driver for the Indian economy over the last decade. Lucrative job offers,
overseas opportunities, plush offices and ultra modern infrastructure
facilities, glamorous lifestyle, rapid growth prospects, and above all,
king-size pay packets with healthy increments and attractive fringe benefits. IT
continued to be the sunshine industry in India. No doubt then that grabbing a
job in the IT industry became the dream for every educated young Indian.

Alas! Nothing continues to be all that rosy. This is exactly what our IT
industry experienced as the recent global slowdown left its ugly trail in India
as well. Despite remaining least affected in the domestic market, IT companies
could not fully dodge the global impact as business remained slow during the
last two years. CY 08, in particular, was badly impacted and the second half of
FY 09 was worse.

As Indian IT companies struggled to manage their capital flow as well as
shrinking profits, it was time to implement various cost-cutting measures. And
the first to face the blow, obviously, was human resource which accounts for the
largest chunk of any companys expenditure. Over the last one year, many
high-profile as well as fresh IT professionals lost their jobs as most companies
took to downsizing their workforce. As if that wasnt enough, companies not only
withdrew or minimize annual increments, but further slashed remuneration
packages of their employees as well. This resulted in an obvious crisis, as
dissatisfaction levels of employees kept on rising and employers had to find new
ways to keep them happy. Thinning salaries and continued fear regarding loosing
jobs became even more acute last year and the situation still remaines
ambiguous. Although the economy finally seems to be looking up again, by when
things will improve is a question that is yet to find a definite answer.

Salaries Get Thinner

Almost every industry had to bear the brunt of the ongoing challenges posed
by the economy. But the worst hit seems to be IT as its an already established
paymaster in the Indian job market. It lost its sheen as pay packages dipped
further last year. Even the biggest paymasters within the industry had to apply
a breakas salaries nosedived to compensate the degrading business situation.

The trend of trimming pay packets, that was first visible in FY 08, grew
stronger in the following one year. The average industry rise in absolute salary
witnessed a shockingly negative growth as it declined by leaps and bound. From
the 17% average salary growth recorded in 2008, it dropped down to a meager 1%
in 2009. That means there has hardly been any rise in the actual take-home
amount for employees over the last one year. There are few reasons that have had
a cumulative effect resulting in such a disappointing outcome.

Unlike 2008, the average salary hike has failed to correspond with that of
average salary growth in the industry. The average salary hike last year has
declined by almost 50% (9.5 compared to 17.6 in 2008). For the first time in the
history of the Indian IT industry, salaries were reduced by up to 10%, and 15%
of the total workforce were the unfortunate ones to meet with this fate.
Thirteen percent of the workforce received no hike last year in their salary.
This changed the entire equation. It was in 2001-02 when the industry received
its first blow in the form of the dotcom bust. However, the impact was limited
only to those companies focusing on online business. The recent meltdown had a
more compelling and widespread impact on the industry, creating an alarming
situation. In an industry which is accustomed to receiving an average hike of
nearly 20%, an average 10% increment is far from being modest. No doubt that the
general morale of the industry went for a toss with discontent levels among
employees piling up.

Curb on fresher recruitment continued to paralyze the industry from absorbing
new talent. Among the few who were recruited were offered much lower pay
packages compared to their predecessors. This definitely affected the average
salary rise in the industry.

The Top Paymasters

With the economic meltdown becoming more severe last year, disparity in
salary structure; reduced pay packets, no or limited increments; freeze in
recruitments; as well as layoffs became regular features. Interestingly, the
bigger a company was, the more acute has been the impact. And, of course, it was
the MNCs who suffered most due to their global business presence. As the world
economy took a major hit, it was these big MNCs who met with heavy losses as
their businesses shrunk. However, their businesses in the domestic market
remained less affected as the Indian economy proved to be better equipped to
tackle the recession. But that did not save them from the crisis and they had to
implement major cost-cutting measures in the form of layoffs and salary cuts.