Rising rupee hitting wages in IT sector

[Kalyan]

Hi...

The rupee has hit where it hurts the Indian IT companies most. The pay cheques of the employees is becoming a burden on their balance sheets and worse is still to come.

The software professionals are not just employees for Indian IT companies but weapons in the war for survival as the headwinds in the US economy get stronger. But now keeping them happy is becoming a big challenge for the Indian IT pack.

The strong rupee that has run up 12 per cent in a year is a drag on profits so instead of the usual 12-15 per cent wage hikes every year, companies are finding it difficult to sustain current wage rates.

Wipro and TCS have both cut the variable component of salaries even a percentage or two of the incentive money.

The company believes it can help improve margins given their large employee base constituting almost 50 per cent of their overall costs.

The clear signals that other margin levers like reducing sales, general and administrative expenses and improving utilisations are not working anymore.

So will the IT companies get away with paying lower wages on shaky market sentiments?

What is interesting is the split within the industry on wage outlook.

"I have heard many industry leader say it is a wish they are expressing it to remain in 12-15 per cent. The choice in terms of jobs have increased,” said Mohandas Pai, Member of Board, Infosys.

So no clear direction from the Industry on which way wages will go in future but clearly the problem will only increase as competition from players like IBM and Microsoft increase in India and from other growth sectors like manufacturing and financial services which could take away employees with bigger increments.

Wat u think abt Dis