Jobs and pay

The salaried Indian employee is indeed reaping rich rewards from the growth of the economy, as a report in this newspaper yesterday showed.

By all available indications, the rise in salaries and wages as a percentage of net profits in corporate India is likely to continue as a trend.

According to a survey done by Hewitt Associates, average salaries in 2004 are projected to grow by around 12.5 per cent "" the highest in Asia.

Non-banking finance companies are expected to dole out the biggest salary hikes, at 14.7 per cent, followed by software developers at 14.5 per cent, and media and entertainment companies at 14.2 per cent. This comes on top of an 11.45 per cent increase in average salaries in 2003.

The study also shows how the linkage between pay and performance is getting stronger, especially for knowledge workers. An outstanding performer, for example, typically gets more than twice the salary increase earned by an average worker.

The hunt for talent has also meant a sharp increase in the variable pay component "" from 16 per cent in 2002 to over 19 per cent in 2004. In companies like Wipro, the variable pay component is as high as 50 per cent at some levels.

Rapidly rising salary bills can make companies uncompetitive. In business process outsourcing companies, for example, salaries make up for 40 to 60 per cent of total costs.

So far, with salary levels moderate, companies are able to expand rapidly and create more job opportunities.

Spectramind, a Wipro subsidiary with around 8,500 employees, is now almost double the size of Maruti, India's largest car maker which employs around 4,000 people.

GE's captive business processing unit employs nearly 20,000 people. Third party service providers like Accenture, IBM Global Services and Cap Gemini are expected to recruit more than 25,000 people in the next two years.

But BPO is not the only segment in the IT industry that is brimming with jobs today. Software services have bounced back and companies are on a hiring spree, with the result that the number of job opportunities has more than trebled since 2001.

If, a couple of years back, 400-500 people were being hired every month in the IT industry, today that number would be 2,000-3,000.

An International Labour Organisation paper has shown that information and communications technologies will create 1.1 million jobs in India by 2008 through the expansion of the IT-enabled services sector. These jobs would be in addition to those in the software development industry.

The question is of course maintaining a balance between job growth and sustainable salary levels. The key lies in the sustainability of rapid profit growth.

There can be little doubt that, as Nasscom's Strategic Review has reported, the country will face a major shortage of knowledge workers (at nearly 530,000) during the next four years.

If steps are not taken right away to get more trained people into the market, salary increases will accelerate as shortages develop, and drive costs up to unsustainable levels. But this is in the future. At the moment, the numbers seem to be in balance.