Amid growing economic concerns and high attrition rate, leading outsourcing firms like WNS, ExlService and Genpact have warned that rising employee salaries could eat into their profit margins.
The companies are also worried that fattening pay packets in India could prevent them from sustaining their competitive advantage since wage costs have been historically lower in the country as compared to the US and Europe.
Separately, all the three US-listed outsourcing majors with significant operations in India, ExlService Holdings, Genpact and WNS expect soaring salaries and other employee costs would slash their profit margins in the near term.
"Because of rapid economic growth in India, increased demand for business process outsourcing to India and increased competition for skilled employees in India, wages for comparably skilled employees in India are increasing at a faster rate than in the US and Europe, which may reduce this competitive advantage," WNS said in its annual filing to the US market regulator Securities and Exchange Commission.
ExlService, which posted a marginal decline in profits for the second quarter at 5.3 million dollars, had also earlier said that employee compensation would have to be rapidly increased as compared to the past.
Earlier this year, IT majors Infosys Technologies and Wipro had also pointed out that rising salaries in the country posed a business risk for them.
On an average, the salary hike in the BPO industry is in the range of 9-10 per cent.
According to an industry insider, the threat of rising pay has always been there for the firms mainly in the BPO and IT areas.