Wages at IT multinationals start melting down
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Wages at IT multinationals start melting down

Friday, 27 February 2009, 07:01 Hrs   |    14 Comments
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Wages at IT multinationals start melting down
Bangalore: Software multinationals in India have begun freezing wage increases, slashing salaries and postponing merit-based hikes, a study by Indian consulting firm Zinnov has found.

"Though Bangalore stands highest in its average salary for multinational R&D firms, followed by Pune and Chennai, the economic slump is causing undue pressure on them to retain compensation levels," Zinnov director for advisory services C.S. Chandramouli, told IANS after the survey was made public.

Hinting that IT salaries in 2009 would see a freeze across the board in a majority of the firms surveyed, Chandramouli said the average increment would be in the 5-12 percent range.

"Of the 30 representative multinationals surveyed in these three cities (Bangalore, Pune and Chennai), 27 percent of them said they have frozen salary increases this year, while 42 percent said they would provide salary increases and 15 percent have postponed their merit increase cycle to take a call at a later stage if the economic scenario changes," Chandramouli said.

As a preferred destination for IT services and R&D, about 680 multinationals operate in India. Many of them have more than one R&D centre and presence in one or two of the three cities surveyed.

According to Zinnov's annual report on "Compensation and Benefit Study 2009", 12 percent of the MNCs have announced 5-10 percent salary cuts either for senior management or across levels.

"The survey highlights that multinationals are also shifting focus to the variable pay component to reward and retain top performers as opposed to fixed pay. Some of them have even restructured their compensation, linking employee rewards to individual and organisational results," the report said.

Referring to the adverse impact of the tough economic conditions on the compensation budgets, Chandramouli said MNCs were attempting to balance their need to retain key talent and address concerns over wage increase.

"Organisations are being proactive in managing people cost as it constitutes about 62 percent of the total operating cost," he noted.

Highlighting compensation trends across functions like engineering, quality assurance testing and technical architects, the report said senior positions such as engineering manager and director engineering continued to be on a rise, with an average eight percent increase.

As India's IT hub, Bangalore, however, continues to dominate the compensation index, especially in software product and R&D.

"Bangalore engineers are paid five percent higher than their counterparts in Pune and eight percent higher than in Chennai for engineering and quality positions," Zinnov consultant Sahana Shetty said.

However, average salaries of senior positions in the three cities are similar, though average salaries at junior positions are two-three percent higher in Bangalore.

"Employees are not clear if they will be laid off or if the projects they are working on will be de-prioritised. They are also concerned about the financial health of the parent company. Employees are frustrated with cost cuts for what seem like inexpensive benefits (snacks, lunch, office parties, etc)," Shetty added.
Source: IANS
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Reader's comments(14)
1: This will help the IT people to realize the true value of the money. Blessing in disguise.
Posted by:GKM - 02 Mar, 2009
2: There is no increment in the salary for 2009,IT employees are only looking for saving there seats. Now recission is stablising the imbalance created by IT company. Now people relasing the value of money.
Posted by:Pradeep KS - 02 Mar, 2009
3: There is no raise in teh salary in 2009. I do not think any comany will raise this year.Again teh consultant is guessing from 5%- 15% hike in this year. This shows how in correct this news.. This yearmarket correction year all fat salary will get corrcted.This will help Mgrs to have matured team than arrogants
Posted by:Rakesh - 01 Mar, 2009
4: These IDIOTS are the ones who increased the average wages in the industry. Now they are slashing.

Not Multinationals....they are BULTINATIONALS.
Posted by:critic - 27 Feb, 2009
No one is an idiot. Simple economics: Demand meets Supply. Period.
Venkat Replied to: critic - 07 Mar, 2009
6: IT companies were Over Paying to their Employees and MNC's were adding icing on the cake. They never knew that their pay structure was creating imbalance in the market compared to other industries.

I think this is a good move, people should get what they are worth, overpaying was never a solution and cutting the corners should not Heart The people.

I also belong to IT industry and somehow I like recession because I can now retain good people due to market conditions, that too without offering the high perks.
Posted by:Mahendra Sharma - 27 Feb, 2009
7: Almost all companies were earning abnormal profits in the past years. Some companies were showing rosy pictures to the general public. All other manufacturing/Financial companies are strugling for their survival. Now we all should understand and feel that the Almighty will take corrective measures from time to time and teach the public that I am here to correct things and to avoid imbalances between the poor and rich. What happened by payment of enormous salary by IT companies than what a graduate or post graduate deserve to draw. Prices of all commodities, homes etc., went up due to huge demand, but now whoever availed loans are not able to repay due to hike in interest rates and reduction in salary etc., Whatever salary paid by any companies should be in comparision with other industries or otherewise there will be huge disparity between people which will affect the economy.
Posted by:R.Pitchumani - 27 Feb, 2009
I completely agree with Pitchumani, IT guys have changed the entore economy and have caused a imbalance to indian economy. They hardly constitute a 2 -3 perof the entire working population in india. The exorbitant salaries and perks have made common man whose avg salary was 5000 life misearable, he was deprived of what he is worth to get.This also shows how the IT companies have used the resources, when they want they would keep them high and when they dont want they simply lay them off. May be this is a warning signal for all of those to realise that traditional and non IT domains are also a good option.

There should some mechanism or a measure to state that this is teh min and max sal a resource of so many years exp should get and if an org employs the org should have that resource for a min years in teh org. This way you can stop somebody r ecruting in 1000's and simply laying them off when they don t need them.

There should be stability in the economy and status of an resource. Honestky speaking when i am 45(I am from IT) i dont want my kid to come and say to me "Hey dad i just heared from mom that u have been fired from your job,.... Thats Bad "
sathish Replied to: R.Pitchumani - 09 Mar, 2009
9: Baapare..........what a terrible condition........ is there any solution for this deepening crisis?
Posted by:Renuka - 27 Feb, 2009
Yes....there is only one solution ....leave your current job and ask for a 20% hike to new employer :).
Manu Replied to: Renuka - 27 Feb, 2009
Well the solution to this is .. stop keeping expectation and show more attention to work .. also be ready to accept the fact of life with no salary rise and an anticipated cut in your salaries...
Mehul Doshi Replied to: Renuka - 27 Feb, 2009
may be but in india in it company not paying the salary according to other countries .and getting work more than that.
priya Replied to: Mehul Doshi - 27 Feb, 2009
If IT industry starts paying salaries at par with the developed nations like US and UK then Indian IT companies will doom. No business will flow into India if we are not cost effective. The complete outsourcing works on the principal of cheap labor and that's exactly what we are offering.
Nitin Sawhney Replied to: priya - 02 Mar, 2009
Over the years, the perk offer in IT have gone up drastically, which was a real concern. That really needs a correction. But comparing wages across industry and sector will not make sense. Its all about "SURVIVE" now ... To get the other benefits, we still have time. I don't see anything wrong in cost cutting measures that firms are adopting. Remember, that is the only way the head count cut can be reduced. I would recomend, if organization asks the employee about how can they reduce the cost, they will get better way to get out of it. And also, employees will be happy and not frustrated by the steps.
Sunil Replied to: Nitin Sawhney - 03 Mar, 2009