IT, ITeS industry likely to give single-digit pay hikes

Written by Shreya Roy | Shreya Roy | Debojyoti Ghosh | Debojyoti Ghosh | Bangalore | Updated: Jan 17 2012, 07:57am hrs
If employees of the $76-billion Indian IT/ITeS industry were expecting good hikes this year, they are in for a big disappointment. Uncertain global economic conditions and the possibility of lower-than-anticipated growth for the sector may take a hit on wage increments, say head honchos of IT firms and human resource experts.

While hikes were in the range of 11-15% last year, this years increments are not likely to exceed the mid to high single-digit range. Appraisals are also likely to be tougher, with no hikes at all for average performers.

Among the top-tier IT firms, Infosys has already confirmed that the possibility of hikes similar to last year are bleak. Speaking to FE, V Balakrishnan, chief financial officer, Infosys, had recently said, We have to take a view on next years growth. In all likelihood, wage hikes will be in higher single digits next year and not in double digits. This is likely to happen for the whole industry.

Mid-tier IT firms are also expecting hikes to be subdued. MphasiS, for one, says it expects hikes to be in the range of 5-8%. Employees recognise market conditions and understand things will not be like last year. The industry average will be 5-8% and we will be somewhere in that range, says Gopinathan Padmanabhan, executive vice president and head, global delivery, MphasiS.

Last year, MphasiS had doled out hikes in the 12-15% range. Infosys had given hikes at an average of 10-13% across levels,while for Wipro, hikes were between 12% and 15%. HCL Technologies gave 12-14% hikes.

But even these single-digit hikes will be reserved only for top performers. Average performers may have to brace for the possibility of not getting a raise at all this year. Hikes will be limited to 10% at best for top performers and those who are not amongst the top will not get hikes at all. Business leaders will give a much stronger consideration to return on investment of each employee, says Sangeeta Lala, senior vice-president, sourcing, of staffing company TeamLease Services.

According to experts, the variable pay component of salaries will be increased for employees across the board, with more performance-linked components coming in.

Says Ronesh Puri, managing director of head hunting firm Executive Access, Variable component of the salary is likely to go up by 10% this year. Hikes will be based more on the performance and variable side.

At present, 10-20% of an employees overall CTC falls under variable pay. Puri projects hikes to be in the range of 6-8%. With margins under pressure, flexibility to dole out hikes is far lower across the tier-I and tier-II companies. Things dont look bright going forward and the environment is also not stable enough to make good hikes affordable, he adds.

However, some are of the view that the gloomy appraisal scenario may be restricted to IT services only. Those working in niche functions, such as product engineering, may see relatively bigger jumps.

People working in niche segments, such as IT products company and specialised jobs, can expect hikes between 12% and 15%. For services firms it will be much less, says Aditya Narayana Mishra, president, staffing, Ma Foi Randstad.

During the previous recession in 2008, firms had postponed hikes till they had a clearer picture of where their businesses were heading. This year, too, there may be a possibility of such delays. Timing of the appraisals is dependent on how the world turns out. For instance, in 2008, hikes were effected in October and not in April, says Balakrishnan of Infosys.