Supply crunch, rapid growth drive salary hikes

Scorching growth in many sectors and severe talent crunch is forcing employers to dole out good hikes to their employees. This is the story in real estate, telecom, upstream oil & gas services, hospitality or banking and financial services, which have seen the maximum increase in salaries in last two years.

In real estate, scorching growth and rapidly-professionalising industry is creating pressure on the limited talent pool in the industry. This is forcing real estate firms to hire people from other sectors, like sales and marketing people from FMCG, telecom or IT companies much the same way as the telecom sector did earlier.

Hewitt Associates estimates that most real estate companies are operating at 25-30 per cent of shortage in middle and senior management levels. ''They are fairly aggressive paymasters and hiring in large numbers. The shortage has affected their ability to execute projects in time and speed to market. PE firms are driving them to do things differently,'' adds an HR expert tracking these companies.

The telecom industry is growing at a frantic pace. With several new players like Videocon Industries and Unitech likely to enter and existing players ramping up their operations, there will be severe pressure on talent. ''Growth itself is putting pressure on talent. You will need lot many people to support your growth,'' said an HR expert, who estimates a 10 per cent manpower supply gap in telecom.
 

HIGH GROWTH
	salary hike(%)	last year (%)
Estate	28-29	25
Telecom	17.6	17.2
Energy, Oil & Gas	17.5	19
Banking & financial services	12.9	16.4
IT and IT-enabled services	12-Nov	14.1

Luckily, telecom has managed to create a good brand "as a place to come in,'' as an HR expert puts it. ''If you ask a guy to join a real estate firm today, he will be cautious as they are still promoter-driven. Telecom is a well-established industry globally and companies here were promoted by big business houses, who did not have such image problem,'' added the HR expert.

With increasing activity for oil and gas exploration in India, salaries in upstream oil and gas services have been growing at 17.5 per cent. "These are specialist jobs for drilling engineers, petroleum engineers, and tend to get benchmarked across Asia-Pacific. The people are very mobile (typically work on a project for six months) and have preferences for locations they want to work in," said Nitin Sethi, consulting leader, South Asia, Hewitt Associates.

The sub-prime crisis in the US and the credit crisis, which saw institutions write-off $380 billion in losses, have impacted hikes in banking and financial services in India. ''Banking is the most affected industry where salary increases are going to be 3-4% less than last year. They are also conscious that by giving lower salary increases, they would expose their talent to poaching by others,'' said Nitin Sethi, consulting leader, South Asia, Hewitt Associates.

But the quantum of variance pay (which can go up to 20-30 per cent at senior management) is getting affected and people will not make as much as they did last year. ''The bonuses have not been dished out yet. Given the losses suffered by institutions in the credit crisis, bonuses could come down by 15-20 per cent,'' said Marcel Parker, chairman, IKYA Human Capital Solutions, a new HR firm.

The slowdown in the US could hurt business in the short term, and hence IT companies are playing it safe. Infosys Technologies, which has doled out an average salary hike of 11-13 per cent to its 90,000 people, has cut back on its recruitment. This year it plans to recruit 25,000 people, 7,000 less than what it did last year but raised entry-level salaries to Rs 3 lakh, from Rs 2.8 lakh.

But analysts say the long-term IT story stays intact. "Indian IT is still growing at 35-40 per cent, and companies are still bullish on off-shoring. The US slowdown could hurt in the short term but eventually it would translate into larger, bigger business opportunity for Indian IT companies, and its employees,'' said Sethi.

Though Indian IT firms are setting up centres abroad for tax advantages and for being close to their customers, "the basic model is to get work offshore and deliver out of here,'' said an HR expert. ''If IT companies grow at 40 per cent, employment will grow at 20-25 per cent, with India meeting 85-90 per cent of requirement,'' he added.

Similarly, while many IT-enabled firms doing low-end voice transactions, are setting up midsize operations (1000/1500-strong centres) in Eastern Europe, Philippines and China to have more cost-effective operations, a lot of speciality work (analytics, legal work) is coming to India. ''As we go up the value chain, companies are asking where can they do the less-complex more effectively,'' said an HR expert who closely tracks these companies.