Salaries of freshers at Indian IT firms have been stagnant for two decades, in stark contrast to skyrocketing CXO salaries. Recently, Wipro asked candidates it had previously offered Rs 6.5 lakh per annum (LPA) if they would be willing to join immediately, at Rs 3.5 LPA. Why are the salaries so low? Ayushman Baruah explains
Quality issues with the engineering graduates?
Multiple studies have shown that the bulk of the fresh engineering graduates are not immediately employable, which raises questions on their quality and the salaries they can command. According to a report by Aspiring Minds, only 2.5% of the engineering graduates possess tech skills in emerging technologies like artificial intelligence (AI), which are necessary for the digital era.
Also read: India’s chip market to hit $55 bn by 2026: Deloitte
Also, the IT sector in the country requires employees fluent and well-versed in English, as they need to communicate with international clients. Many of the graduates do not possess strong communication and other soft skills, which is seen as a major setback when it comes to commanding higher salaries.
Gap between the academic curriculum and industry needs?
IT freshers comprise 20-30% of the five-million workforce in the sector. So, it shows that despite the gaps in competence at the fresh-graduate level, the curriculum may not be too out of date. At the same time, there is a need to rejig the academic syllabus at the engineering colleges. Experts believe the students must be introduced to the industry-initiated courses, with engineering colleges signing agreements with players in the relevant industries. This will improve industry-academia interaction and will enhance the employability of the graduates.
According to the experts, ad hoc changes in the Indian higher education system will not help address the problem. Tackling the curricular gap actually needs a systematic and fundamental change if it is to deal with high unemployability numbers meaningfully.
Did IT firms over-hire in the past?
Also read: Adani Group’s debt concern may be overstated: SES
During the pandemic, the digitalisation wave pushed many IT companies to hire mid-level workers at higher salaries, which pushed up the wages, thereby putting pressure on the margins. The over-hiring has also led to layoffs at many companies under the guise of company restructuring or poor performance at work. Some experts say such expensive mid-level hiring came at the cost of fresher-level salaries, which remained low. It was argued that the work-from-home scenario during the pandemic even made the expensive hiring of mid-level IT workers easier than earlier.
Some firms started to fix the problem of much too expensive hiring by trimming the variable pay. But other experts pointed at the revenue productivity for each employee at marquee firms remaining at high levels, instead of falling with the expensive hires, and argued that the demand environment has stayed robust for these firms.
What is the future of fresher hiring in FY24?
IT services companies will continue to hire freshers as a measure to right-size their employee pyramid as freshers come at a lower cost. A Motilal Oswal report suggests that due to a short supply of people with niche skills in AI, machine learning, and data science, cost of acquisition of these people is very high. Therefore, IT companies lean towards fresher hiring and training them on these skills after onboarding them.
Compared to previous years however, fresher hiring in FY24 could be lower due to the macro-economic uncertainties and delays in clients awarding projects. The top four IT services providers in India have together added less than 2,000 employees in Q3FY23. In fact, TCS
If demand remains healthy, the marquee companies may continue to hire. At what levels, though, is hard to say. While the outlook on global growth is less gloomy at the moment, it continues to remain dull. Escalation of the war tensions in Europe could dampen growth globally. If the growth prospects in Western economies remain under a cloud, it certainly won’t augur well for Indian IT services.
* 2.5% of engg graduates in India are skilled in emerging tech
* 20-30% share of freshers in Indian IT workforce
* 5 mn IT workers in the country; 314,000 of them at Infosys
* 2,000 employees added by top 4 Indian IT firms in Q3FY23