Hefty pay packets a threat to Indian IT companies' margins

By SiliconIndia   |   Tuesday, 27 May 2008, 13:24 Hrs
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New Delhi: A looming threat before the Indian IT industry now is employees' hefty pay packets that could cut down the companies' profit margins.

Country's two largest software exporters, Infosys Technologies and Wipro Technologies, think wage pressures might slash their margins and dent their competitive advantage.

"As wages in India are increasing at a faster rate than in the U.S., there would be high costs for companies in India seeking to employ technology professionals, particularly project managers and other mid-level professionals," Infosys said in its recent annual filing to American market regulator Securities and Exchange Commission (SEC).

To retain and recruit talent, IT companies are doling out hefty pay packets. The trend is all the more visible for middle level professionals and project managers. A recent survey by global management consultancy firm HayGroup said salaries in India are forecast to rise by 14.4 percent during 2008. Infosys also noted that it might need to raise employee compensation more rapidly than in the past to compete with other employers.

Wipro has also cited wage pressure as a business risk in its latest annual filing to the SEC. Moreover, lower wage costs in India are considered as one of the important competitive advantages by the IT firms.

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