As revenue stagnates, Indian techies get single-digit salary hike

Low attrition, shifting business model impact employee compensation

Last Updated : Jun 05 2018 | 4:58 PM IST

At a time when most domestic IT firms are going through a challenging operating environment with shifting business model and higher onsite costs, employee wage hikes across the industry remain subdued at single-digit growth figures.

While most domestic biggies including Tata Consultancy Services (TCS), Infosys and Wipro have given an annual raise of 6-7 per cent this year, employees of French IT and consulting firm Capgemini received a measly 0.5 to 1 per cent rise.

This is part of a broader trend seen in the IT industry where revenue growth has stagnated to around 8-9 per cent with the contribution of traditional maintenance business coming down every year.

Infosys, whose employee attrition rate still continues to high, has effected a wage hike for 85 per cent of its employees ranging from mid-single digit to high-single digit, effective April 1. For the remainder, primarily middle and senior management, the compensation increase will be effective July 1.

Infosys also said it would affect a salary hike for 85 per cent of its employee base will be the effect from April 1. It will be applicable for both onsite and offshore staff. For the balance 15 per cent employees that include middle and senior management-level staff, the compensation revision will be effective from July 1.

“For majority of the people in India, the wage hike will be in the range of mid-single digits. Continuing with the past trend, we will differentiate people on wage hike based on their performance and contribution,” said UB Pravin Rao, Chief Operating Officer, Infosys. The company, however, has announced a $10 million (Rs 652 million) bonus payout for its employees.

Even TCS, the first Indian IT company to cross the $100-billion market cap mark, has announced salary hikes in the range of 2-6 per cent depending on the geographies where the employees are located.

The third largest software services firm, Wipro is no exception to this trend. The Bengaluru-based company has given 6-7 per cent average increment to most of its employees for this year beginning June. However, the company, according to reports, has said that there are some employees who may not have received hikes this year based on their performance as well as progress in the reskilling efforts.

"If you see, actual employee cost is reducing for the IT firms as headcount growth is low. Further, within the current employee strength, employees with standard commoditised skillsets are getting low wage hike. Those who have re-skilled themselves with high-value skillsets are getting higher raise," said a senior HR expert working with a global executive search and leadership consulting firm in India. Pay hikes for fresh graduates remained almost non-existent for years now, the executive added requesting anonymity as he works with some of these firms mentioned above.

On employees working on client sites abroad, the consultant said that IT firms have to give higher raise to retain these talents as the cost of attrition would be much higher overseas than the replacement.

"Firstly, local hiring is more expensive. So, though the salary hike is lower in percentage terms, it is higher in absolute terms for onsite employees. Secondly, even if you hire an Indian origin person for onsite work, he/she would expect higher pay hike due to demand for his/her skillsets," he added.

Lower attrition level is another factor responsible for lower pay hike offered by these IT firms. Employee attrition rates for most of the IT services firms have remained under control on the back of lower job opportunities outside.

For example, TCS saw an attrition rate of 11.80 per cent in FY18 on an employee base of 394,998. Wipro’s attrition rate has more or less remained at the same level 16.6 per cent in FY18 while HCL Technologies actually saw a 140 basis points decline in its attrition rate in FY18 at 15.5 per cent.

"When supply exceeds demand, there will be low pay hikes,” said Kris Lakshmikanth, Founder & CEO of Head Hunters India. “If you see, the attrition levels have come down from a high of 20-22 per cent earlier to 10-12 per cent now. Companies know that people will stay with them. And wage cost is the biggest cost item for IT companies. So, moderation in wage hike actually adds to the bottom line of these companies," he added.