IT & ITeS industry salary hikes may remain muted

Written by P P Thimmaya | Debojyoti Ghosh | Debojyoti Ghosh | Bangalore | Updated: Dec 26 2013, 06:18am hrs
Indian IT-services industryThe Indian IT-services industry for long has enjoyed double-digit salary increases every year
Even as Indias showpiece software-services industry has started to show early signs of steady uptick in demand during the last two quarters, employees of the $108-billion IT-ITeS sector will not have much to cheer as salary increases are likely to remain flat for the coming fiscal.

The IT-BPO sector, which broadly dolled out a wage hike in the range of 6-8% this year, is expected to remain almost flat at 6-9% for 2014-15, according to recruitment firms and observers.

Salary hike should remain in single digit next year. And looking at the current trend of wage hikes among IT companies, we expect salary increment to be in the range of 7-9% next year. This year also we have seen hikes in the similar range, Som Mittal, president, Nasscom, told FE, adding that the overall hiring scene looks healthy for both campus and lateral in 2014.

For FY14, TCS, countrys largest IT-services exporter, gave hikes in the range of 5-10% for employees in India, while IT major Infosys announced an average wage increase of 8% for employees based in the country and 3% for employees outside India.

Bangalore-based software-services exporter Wipro announced an average hike of 6-8% for people in India, while HCL Technologies dolled out hikes of 8% for employees in India and 3% for its onsite workforce in FY14.

Kamal Karanth A, managing director, Kelly Services India, a global staffing firm said, IT companies are more focused on lateral hiring and keen to get their new hires into the billing cycle as fast as possible.

Karanth believes that, despite overall inflationary pressures, the wage increases for the next fiscal is likely to be in the 8-10% range.

The Indian IT-services industry for long has enjoyed double-digit salary increases every year, sometimes even a bi-annual hike, but the situation took a dramatic turn since the 2008 economic downturn that engulfed the global economy. Since then, employees have either seen a single-digit rise in salaries or nothing at all.

Experts point out that with rising wage costs dealing a heavy blow to profitability, coupled with sluggish business growth and foggy visibility into client spends, IT companies can no longer afford double-digit increments across the board.

Amitabh Das, CEO, Vati Consulting, a specialist recruitment firm, feels that the wage situation for IT professional is unlikely to change for the better next year or anytime soon as companies are still cautious about how this demand upturn is likely to unfold during 2014.

The Indian IT industry employs around three million people with close to 60% in the fresher category or well below two years of experience.

The sector during its boom days hired a large number of fresh engineering graduates from campuses, which led to companies approaching the colleges during the sixth semester. But this practice was later modified by the IT firms, who went for campus recruitment only during the eighth semester as bulk hiring was no more the top priority.

This subdued hiring of engineering graduates is also reflected in the salaries, which have remained frozen for the last four years. On an average they get a starting salary of R2.75-3.5 lakh, which is almost similar to the level in 2008-09.

According to Nasscom, the sector had a net hiring of 1,88,300 jobs in FY13. However, for the current fiscal the industry is expected to recruit on a wider base of 130,000-150,000 people as some IT companies are still fighting backlogs from its last years recruitment.

Since the global downturn in 2008, the Indian IT services companies have been going slow on campus recruitment with higher reliance on experienced candidates. This hiring is driven by the business requirements and new technology areas.

Over the last few years, business models have changed. It has become more non-linear and platform based. The industry does not hire in such high numbers what they were use to do earlier. The requirements of the IT companies have changed over the years, said Mittal.