IT Firms Cautious On Salary Hikes

The good news is that salary hikes are expected, though it is uncertain when they will be implemented.

After delayed hiring, layoffs, and late onboarding, employees at information technology services are staring at salary hikes in the range of low, mid to higher single digits this financial year (2024/FY25).

Experts shared that the average salary hike among the top five IT firms will be in the range of 5.5 per cent to 8 per cent.

"We have been hearing that average hikes among top-tier firms will be 7 to 8 per cent. Of course, top performers will continue to see double-digit hikes ranging from 12 to 18 per cent," said Neeti Sharma, CEO, TeamLease Digital.

Even a moderate salary hike reflects the demand scenario in the IT industry.

For comparison, the 12-month period ending June 2023 saw a 12.4 per cent revenue growth and a 14.2 per cent increase in compensation costs.

The 12-month period ending June 2022 recorded a 19.2 per cent revenue growth and a 24.3 per cent increase in compensation costs, according to data from Xpheno, a specialist staffing firm.

"The top seven IT services companies collectively registered a 3.4 per cent annual revenue growth for the quarter ending June 2024, compared to June 2023," said Kamal Karanth, founder and CEO of Xpheno.

"Consequently, they have managed compensation costs with a 2.8 per cent annual growth for the same period," Karanth added.

The good news is that salary hikes are expected, though it is uncertain when they will be implemented, experts noted.

Tata Consultancy Services, India's largest IT company, is the only firm in the industry to announce salary hikes this year. Infosys, HCLTech, Wipro, and Tech Mahindra have yet to do so.

Sharma indicated that hikes could be moderate due to the higher salary increments companies provided in 2022.

"In IT services, employee costs are the highest expense. With business slowing, companies will look to control this. However, top performers will continue to receive double-digit hikes," she added.

TCS announced an average salary hike of 4.5 to 7 per cent for FY25, with double-digit increments for top performers effective from April 1.

Most IT companies have said they will decide on hikes in the second quarter of FY25.

Srini Pallia, CEO of Wipro, mentioned after the company's first-quarter results: 'We have not yet decided when to give the salary hikes. We will decide this quarter, but it will align with market conditions whenever we do.'

In 2023-2024 (FY24), salary hikes at Wipro were implemented in December.

Asked about hikes for FY25, Wipro said in a statement: 'Wipro will award merit salary increases effective September 1, 2024. This decision reaffirms our commitment to recognising and rewarding employee contributions.

'We are in the process of defining eligibility guidelines and performance-based increases. The revised compensation will be reflected in the October payroll along with arrears.'

Infosys has not yet commented on salary hikes. For FY24, the company announced a hike in November.

During a media conference on Q1FY25 results, Infosys' Chief Financial Officer Jayesh Sanghrajka said: "'As you may recall, we last implemented a wage hike in November last year.

'At this point, and with each wage hike, we consider multiple factors, including inflation, the timing of the last hike, and peer practices.'

Human resource experts believe salary hikes will be influenced by the IT industry's revenues and high compensation given in 2021-2022.

"Having incurred high manpower costs during the buoyancy of 2021 and early 2022, the technology sector is now operating under tighter cost controls and austerity measures to preserve margins amid uncertain market conditions," said Karanth.

Employees at some midcap IT firms may receive better rewards than their peers in top companies, experts said.

"These firms have performed better in recent years," said Sharma, "have leaner cost structures, and must ensure they retain talent."

Feature Presentation: Ashish Narsale/Rediff.com