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IT firms cautious about huge salary hike

January 20, 2010 09:55 IST

Indian information technology companies, while back on campuses to hire in big numbers, plan to give moderate wage hikes for the financial year 2010-2011.

"The general benchmark that we are getting to hear is in the range of 5-15 per cent. Clearly, the 30-40 per cent hike days are behind us. Along with the slowdown in the US markets, there is a general mismatch in demand and supply. I think firms are being cautious before announcing huge hikes," says Shiv Aggarwal, CEO of ABC Consultants.

T Muralidharan, executive chairman of TMI Networks, concurs: "There are three bands -- multinationals, Indian large corporates and small IT firms. Among the MNCs, wage hikes will be in the range of 15-20 per cent. Infosys Technologies, Tata Consultancy Services and Cognizant and other large IT companies will give a hike of 8-15 per cent. Among the smaller firms (with headcount of 200-250), the quantum of salary hikes will be higher, at 30-35 per cent, as they will have to retain the experienced people," he adds.

The Indian IT sector has been one of the few where wage hikes were in the 25-40 per cent range till the global economic slowdown set in. These numbers were a reflection of the industry growth rate, which was at 25-30 per cent annually.

Human resource analysts opine that, going ahead, the 5-15 per cent wage hike range would be the benchmark for the IT services sector for a few more quarters, even though the economy is picking up.

HR consultants are also of the view that IT companies will have to give some hikes this year, as many resorted to withholding salary increases altogether in the last financial year and, in some cases, also reduced the fixed pay component.

"This is an assurance from the firms, since they could not give any hikes last year. There might be cases where IT firms might give a small increase in the second half or towards the end of the calendar year 2010," says an HR expert on condition of anonymity.

According to E Balaji, CEO of Ma Foi Management Consultants, the industry is giving hikes of 9-12 per cent as it is trying to gauge the sustainability of this recovery.

"And, by recovery, I mean not only in the US markets but also in the European region and other markets. A double-digit growth rate in salary is only possible if the global economy suddenly grows faster. Certainly, the good days of double-digit growth are over," Balaji adds.

Infosys Technologies recently announced an 8 per cent wage hike for the financial year 2011. Meanwhile, TCS also plans to announce wage hikes, the quantum of which will be finalised only in the next three to four weeks.

HR consultants point out that even those who are planning to jump jobs once the markets open should be prepared to take a slightly lower hike in their salaries, compared with the 2007 and 2008 levels.

Analysts are of the opinion that the range will be 15-25 per cent. Earlier, people would manage to get an increase of as high as 50 per cent or, in many cases, double their existing packages.

"I do not think people are ready to make that shift. There is a general sentiment of cautiousness and those who do shift jobs will get a hike in the 20-25 per cent range. But this is certainly better than what many would have managed to get if they jumped in the last one year. The range was anywhere between higher single digits to 10 per cent," added Aggarwal.

This is much lower than what IT employees would get in 2007 and even in early 2008. "Typically, after a recession, there is a set of people who want to capitalise on the demand and will want a hike in the 30-40 per cent range. But then, there are people who are cautious and focus on the role that they will get. For these people, even a 10-15 per cent hike is also fine," says Muralidharan.

Shivani Shinde in Mumbai
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