Feature

Pay-raise projections

The financial meltdown is forcing organizations to keep a low profile. Companies are avoiding taking the lay-off route; so no hike or even single-digit nominal increments are acting as morale boosters to employees. Renuka Vembu talks to the HR industry experts to find out what is in store for 2009

With the economic situation still looking gloomy, and no scope in sight for improvement in the near future, IT companies are staying cautious and going conservative. Appraisals and increments across the board are going to be nil or nominal in the coming year. While some companies have announced the plan for 2009, some are taking their time to still gauge the situation and waiting to see how the markets play. Others are working parallel to the industry standards, some are factoring the salary as per their own business performance and their current market standing. The average standard, as per industry professionals, works to a mere 6%-8% rise.

Salary structure

With shoe-string budgets and cost-cutting measures being the norm, reviving and revisiting relationships with clients and vendors alike have become the need of the hour. Soaring recession and plunging revenues have made it imperative for companies to take aid of employees in this battle. Appraisals and increments, pay and perks, bonuses and commissions—the effect on them is evident, and the impact, inevitable.

Endeavour Software Technologies has been rewarding their employees clearly above the industry average. Even this year, in spite of the recessionary wave, they continue to stand above the pegged industry standards.

Anisha Sinha, HRD Manager, Endeavour Software Technologies, said, “Salary projections in the IT industry this year will witness around 5%-7% hike as compared to the last couple of years which witnessed around 20% hike on an average across most of the ranks. This would again vary as per the company’s growth projections and performance. In our company, we project 10%-15% salary revisions on an average this year, as against 30% during last couple of years.”

At iSOFT, they are at par with the industry standards, forecasting a hike of 7%-8% for the coming year, as compared to an increment of 12% in 2008. Last year the salary projection was between 14% and 16%, while some organizations even gave a 20% increase. Reflecting on the condition this year, VPB Karthikeyan, Associate Vice President, HR, iSOFT, said, “The overall performance of the organization, the extent to which the market is moving, performance of the employees and the criticality of the skill sets determine the salary projections. The market has been volatile and unpredictable, the projections do not hold good for more than six months. With the knowledge about the current downturn in the global market, we are sure that our projections will hold good for at least one year to come. We have a contingency plan in place based on the current market conditions. We also have another contingency plan based on a simulation exercise in terms of market recovering rapidly and moving into a reasonable state of stability.”

Sanjay Paul Antony, Senior Vice President, Human Resources, Subex, mentioned, “As we do every year, we have done a comparative study of salaries in our industry and also looked at industry projections for salary increases for the next year. Overall, we see moderation in increases, and interestingly, a significant jump in the number of organizations deciding not to give an increase. For us, we see only a slight moderation in the increase vis-à-vis last year. As is the case every year, compensation budget planning (which is part of the overall budget exercise) is determined by the capability of an organization to afford this. Organizational performance is the key constituent determining this. While organizations have always been talking about how they compare vis-à-vis the industry in terms of ‘average percentage increases,’ this year, the differentiating factor would be who would be giving an increase vs. who wouldn’t, albeit moderate.”

Salary projections are based on factors like work-profile of employee, nature of work he/she undertakes, the demand for the skill-set, future projections for company growth and the individual performance, Sinha added. The pay hikes in GlobalLogic is driven by factors like their financial results, their salary benchmarking in the market and market salary increment trends. Iti Kumar, AVP, People Development and Employee Services, GlobalLogic, viewed that in 2008, salary increments were being driven by factors like company performance, individual performance and market trends. The only difference this year is that other than these three important factors, cost control issues are playing a crucial role for salary increments.

Ranjana Singh, Head HR, Xoriant Solutions asserted, “Company performance, individual performance and market environment have been the major factors that affected last year, and the industry and its ecosystem will continue to bear their brunt this year as well. Candidates with rare skills may still have an edge over the lesser fortunate ones who have the general skills. Organizations scurrying for projects may give hikes to the high performing employees they would like to retain.”

People with cross-functional knowledge, niche skill sets, exceptional performers on the job, adding value to work each day, etc., are the ones who are given space within an organization. As against the earlier times, companies are clear on their rules and bear an indifferent attitude towards employees who are slow learners or ones who possess generalized skill-sets that are widely available. The scope for allowing people to learn at their own pace or giving margins for errors and rectifications have been replaced by stringent quality standards and a zero tolerance level. The flab needs to be discarded and costs need to be cut—so breeding inefficiency or below par productivity are attributes that companies can no longer afford to deal with.

A unified effort

Market uncertainty continues to plague India Inc. and the near future seems to be bleak. Managing with minimal salary rise yet maintaining the competitive edge is a touch balancing act.

Endeavour Software foresees the projections to hold true as it is being ensured that the company’s growth prospects that are being taken into account for projecting salaries is not considering those prospects which have even slightest chances of not being closed. Given the sluggish economy worldwide at present, it should not amaze an organization if deals carried quite forward in the sales cycle get sidelined at the last brink. Hence the contingency plan resides in the principle of taking only the clinched businesses that are ensuring a regular flow of revenues as the foundation of projecting a company’s growth during this year. At the same time, a more frequent overview of the organization’s growth and a study of the subtle changes in the market conditions have become very much essential for the management in every organization in the current scenario, said Sinha.

They also believe that the competitive edge in market, irrespective of the market conditions, relies as heavily on work environment, work culture, the vision of the organization and one’s identifying with it, if not more, than one’s salary/remuneration. Sinha added, “Hence the balance between moderate pay cheques and competitive edge in market gets self-maintained if other variables are taken care of even if the latter fluctuates with market uncertainties. At the same time, today the understanding looms large that an organization that has enabled itself to be in a position where it does not need to lay off employees, is rewarding performance and ensuring salary hikes, even if it is nominal, is in an enviable position vis-à-vis any other that might provide a higher pay cheque but may cut back salaries or lay off in very near future.”

Singh felt that decreased billing rates, uncertainty in business, delayed payments, building up of organization in business and employees motivation terms, are some of the factors which continue to plague IT, and managing them itself will help corporates retain their competitive edge.

Companies are grappling with the need to maintain tight pockets at one end, but yet sustaining the trainings and improving the R&D activities at the other. Standing out in the crowd, retaining employees and their trust, understanding vendor or client requirements and being supportive, providing value-added services or solutions, improvement in organizational performance and individual productivity, maintaining the brand name and keeping the goodwill intact, are areas that need to be threaded prudently. The times are tough, and companies need to be tough too. Standing the test of time is true endurance.

renuka.vembu@expressindia.com