Sportsmen may be complaining about sub-standard facilities ahead of the troubled Commonwealth Games, but for employees of India’s sunshine IT sector, it’s time to get pampered as companies look to dole out mid-term raises, promotions and a larger share of variable pay over the next two months.
“Market dynamics have changed over the last few months. Almost every sector is hiring, which makes it difficult for IT companies to retain talent, especially those who have some specific domain expertise,” said Vati Consulting CEO Amitabh Das. “Things are likely to change by the end of 2010, after measures such as salary hikes, promotions and variable payouts are taken.”
Driven by the need to retain talent and keep employees motivated, companies such as TCS, Infosys and Wipro are planning to give out lucrative variable payouts, promotions or moderate salary hikes to their employees. Infosys, the country’s second-largest software exporter, is planning to give promotions to its staff across levels in October. Those elevated will also be given a promotion-related pay hike. Wipro, which gave out an average of 9% hike to its employees in February, may also consider another round of raise in the next few months.
According to Wipro joint CEO (IT Business) Suresh Vaswani, “It’s not that we will not look at it (mid term hikes). It’s not that we will only go by the cycle because markets change, customers’ situations change.” Along with salary hikes, the company had also given 20,000 promotions and restricted stock options to employees earlier this year.
Although many of the IT firms had declared salary increments and promotions during the first half of this year, attrition remains a concern. Attrition had eased during the global economic downturn, but has again gained momentum since the beginning of this year, in some cases up to 25%. India’s IT sector battled attrition rates of up to 40% during the boom years of 2004-05.
To counter this, companies are trying to retain staff with generous raises. Infosys, for instance, did not increase staff salaries in April last year due to the global economic slowdown, but declared increments last October and again in April this year. It also elevated about 5,400 employees in April. Junior to middle-level employees received salary raise of between 13% and 17%, while increments for senior management was 10% on average. “The intent is to retain employees and keep them engaged.
They should feel adequately rewarded and valued. We ensure this by keeping the compensation structure in line with market standards,” said Infosys head of human resources Nandita Gurjar. While Infosys is offering a combination of promotions and salary increments to those getting promoted, TCS is luring employees with a larger share of variable pay to retain talent. For the quarter ended June, it has already paid employees 100% of their variable pay.
Wipro’s strategy is on similar lines too. The third biggest IT services exporter has assured staff that they will get a guaranteed variable pay of 100% for every quarter this year. Unfortunately, this cheer may remain restricted to the IT sector. Others like FMCG, consumer durables and auto sectors are not planning to give another round of hikes. Cola major PepsiCo India last gave a mid-term hike in September 2007, after doling out annual increments in March in the same year.
“Our decision to give mid-term hikes is driven by market forces. We benchmark our salaries as per industry standards and whenever we see a gap, we decide to give mid-term hikes and bridge that gap,” said PepsiCo India ED-HR Pavan Bhatia. Other companies such as LG Electronics and Maruti Suzuki say they prefer to stick to their annual appraisals and increments process.
Hewitt Associates principal for performance and rewards consulting, Sandeep Chaudhary says companies had doled out mid-term hikes in a few sectors in 2007, but the same buoyancy is yet to return in 2010. “Very few companies would evaluate giving mid-term hikes because majority are yet to see business and talent justify the same. Also, return on compensation spend is the focus, and even though growth is back, organisations will balance it with fiscal consolidation and prudence.”