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Gap between mid-level, fresher's wages in IT industry is set to widen by 8 times 

Shreya Roy, ET Bureau Dec 24, 2013, 12.06PM IST

BANGALORE: The gap between freshers' wages and mid-management salaries in the information technology industry is set to widen by at least a good eight times this year as companies look to rein in the cost of training freshers.

While mid-management level wages were five to six times the compensation given to fresh graduates as recently as five years back, the number has jumped up to eight times at the upper limit this year, according to human resource consulting firm Mercer India. Especially post the recession in 2008, entry-level salaries have remained stagnant at Rs 2.75 lakh per annum to Rs 3.5 lakh per annum. "In comparison, mid-management salaries have grown at 8%-14%, and the difference has gone from 5-6 times, to at least 5.5-8 times of entry-level wages now," says Shanthi Naresh, business leader, Information Solutions, Mercer.

Entry-level salaries have fallen over a 10-year period, adjusted for inflation, whereas mid-management salaries have grown at anywhere between 100%-150% in the same time, according to Subeer Bakshi, director, talent and rewards, Towers Watson. According to the consultancy firm, a decade ago, mid management salaries were around Rs 7 lakh per annum to Rs 8 lakh per annum. Currently, they are at Rs 15 lakh per annum to Rs 18 lakh per annum at IT-enabled services firms, and Rs 21 lakh per annum to Rs 22 lakh per annum at MNCs. 

The biggest reason for the growing gap, from the companies' perspective, is demand and supply. Mid-managers are hard to come by, while 600,000 engineers graduate each year, far surpassing the industry's appetite for only 250,000. And the engineers who do get hired are rarely close to being industry ready, leading to high training costs at the entry level. This is prompting engineering students to take a harder look at their skills, with companies measuring salaries against expertise.

"Higher pay for freshers is difficult, considering you have to spend at least a year in making them productive, with up to 22 weeks of full-time training, which is a huge cost," says Som Mittal, president, Nasscom.

Besides, managing wages is a big part of keeping costs low. As Prithvi Shergill, chief human resources officer, HCL Technologies says, "We are in a competitive space, and we do need to manage our cost of supply; given that this is 50%-60% of your profit and loss statement."

IT companies agree with the estimates. Mindtree's chief people officer, Ravi Shankar, says he concurs with Mercer's industry average. "Our mid-management salaries have grown at 6%-10% every year. Against a median entry-level salary of Rs 3 lakh, mid-management is at Rs 15 lakh per annum on average. There are no plans to revise fresher salaries at this point," he adds.

Mid- management salaries at Wipro are about 5-7 times entry-level compensation at this point, says Samir Gadgil, global head, Compensation & Benefits, Wipro. He adds that there are no plans to revise the entry-level salary range from Rs 2.75 lakh to Rs 3.5 lakh per annum.

 While Infosys declined comment, TCS, which had given average wage hikes of 8%-10% in FY14, says it will not be revising fresher salaries. And HCL, which doled out hikes of 8% on an average across levels, also says the same. 

Although the poor pay does not bode well for fresh graduates in IT, the new entrants are being pushed to reconsider how they invest in their education, given that pay gets better as they go up the ladder. They are also expected to proactively increase their value proposition, instead of taking a plain vanilla engineering degree as a ticket to a high-paying job.
"If you can take more complex roles, equip yourself with in-demand skills from the beginning, and if you are flexible in terms of locations and work where required, we will pay you more," says Shergill.

Engineering graduates now need to boost their resumes with expertise in high-growth areas such as digital media, big data, analytics, infrastructure management, in addition to a track record in leadership, says Sunil Goel, managing director of talent search firm GlobalHunt.

While Gadgil of Wipro stresses on developing soft skills, Shankar from Mindtree says, summer internships, projects, relevant research, and smart utilization of social media to attract employer attention, help to a great extent.

While working in IT did not look quite as gloomy to students who had enrolled in engineering three to four years ago, the poor starting salaries have been impacting the image of the industry as an employer in recent times. "Engineers are looking at other options. For instance, if you are a civil engineer, you would look at going out of the country; and a lot of young talent is dropping out of the sector in 2-3 years to do MBAs," says Bakshi of Towers Watson.