Strong Rupee Impacts Indian IT Salaries

An article in The Times of India discusses the impact of a strengthening Rupee on the Indian IT industry.  After years of strong salary increases, Indian IT and BPO companies are moving to slow the growth of salaries.   The story puts it this way:

Salary cost is by far the biggest component of cost, accounting for 45% of IT companies' costs and 40% of BPO costs. With many mid-size and small IT/BPO firms seeing a fall in profits in the Q1 of this fiscal, and most larger ones witnessing a sharp slowdown, varied options are being considered to keep the salary component under check or to get more work out of each employee.

After years of unprecedented growth, Indian companies are finally having to look at how they deploy resources.  It is no longer sufficient to hire large numbers of employees.  Wage increases are causing companies to rethink their personnel strategy and compensation programs:

Says Gangapriya Chakraverti of Mercer India, "Variable pay will come up in a big way. Compensation related to productivity and contribution will take over. Companies will have to be careful about headcount. They will no longer have the luxury of maintaining a large talent pool that's sitting idle." Such pools are maintained to provide for attrition or to use in the event of the firm suddenly bagging a big project.

Rupee's rise is expected to hit BPO employees harder than IT. Unlike infotech, where 30% to 50% of employees work on-site and paid in dollars, in BPOs, 90% of the work is done in India and employees are paid in rupees. "Mid and senior level executives in BPOs have been getting increments of 14-20%. I think that will come down to 8-15%. Overall weighted average of increments used to be 7-8%. That may be down to 4-5%," Vashistha says.