Infosys, India’s second largest IT services firm, announced
on its intranet recently that the bulk of its 158,000-strong workforce would receive a 5-7% pay raise this year. Many
other top Indian IT companies are at least a couple of months away from
announcing their pay increases, but Infosys reflects compensation
trends in the IT industry fairly accurately. 

the outside, single-digit pay hikes in the world’s topmost IT services
outsourcing destination convey a rosy picture. After all, such increases
are unheard of amongst industry peers in the US or Europe. In India, though, the numbers do not add up to good news for the
industry’s three million-plus workers.

the industry has had a record of being a generous paymaster.
Double-digit pay hikes were a regular feature for many years. The
economic downturn, which started in 2008, reversed the trend, however. The
turbulence led to a period of tepid growth and, since then, employees
have been stuck with annual pay hikes of around 4-8%.

year, as demand in key markets like the US and Europe show signs of revving up, IT company employees in India have been looking
forward to a better deal. The much-anticipated doubt-digit raises were
expected to boost workers’ morale, which has been at a low.

fact that low salary hikes come at a time when the industry trade body NASSCOM is forecasting a much better growth for Indian IT in 2014-2015
is adding to dissatisfaction in the workforce. The $100 billion IT
industry is on an upward growth trajectory and hopes to garner more
deals this year in the multi-billion dollar market. NASSCOM projects that the industry will close to 15% rates as against a 13% growth rate in the previous year. Seen in this context, the projected
salary hikes are half the growth rate projections.

are justifying their conservative approach. “The industry works on cost
margins and over the last few years has woken up to the fact that
salary increases are steadily depleting the cost arbitrage,” said
Anandorup Ghose, performance and rewards head at the Indian unit of HR
solutions firm, Aon Hewitt. Ghose said he is not surprised by Infosys’
hike levels and expects the rest of the industry to follow suit.

another year of low salary increases looms, workers are discontented.
The 5-7% hikes at Infosys, for instance, do not amount to much
when viewed in the context of the country’s soaring inflation levels.
After hovering at highs for months, inflation numbers have eased to 4.7% in February 2014. Workers just have to adjust to higher costs of

if the salary hikes are not enough bad news, companies are freezing
hiring, replacing employees at lower salaries, and moving compensation
from fixed pay to variable pay.

are unhappy, but where can they go?” asked Kris Lakshmikanth, CEO of Head Hunters India, a Bangalore-based placement firm.

the other end, entry-level salaries have been static for many years.
Industry-wide entry-level compensation for engineering graduates has not
gone up in the past five to six years. Entry-level salaries for
engineers have barely risen from the 250,000 rupees-350,000 rupees
($4,200 – $5,900) annual levels of a few years ago. 

in multinational IT firms are even worse off than their counterparts in
Indian IT.  Many employees at firms such as IBM and Hewlett-Packard
have received no pay hikes since last year. 

is one silver lining for outperformers in Indian companies: They are being rewarded with bigger hikes. Fixed pay may not rise, but
bonus payouts will be good when companies see growth momentum, Ghose
said. Those with sought-after skills in verticals like analytics, cloud,
and social media stand to gain in the form of one-and-a-half to two
times the pay hike of average performers.