Wages at IT multinationals start melting down

February 27th, 2009 - 12:29 pm ICT by IANS  

Bangalore, Feb 27 (IANS) 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.

(Fakir Balaji can be contacted at fakir.b@ians.in)

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