Zero pay hike likely in IT sector next fiscal

As India's tech firms prepare to protect their operating margins amidst a worsening economy, companies such as Tata Consultancy Services
(TCS) are expected to bring down their wage costs by not providing any salary hikes to their employees next year.

According to the analyst firm Cowen & Company, TCS could bring down its wage hikes during financial year 2010 to almost zero. "Wage inflation is expected to moderate dramatically from over 12% to close to zero, which will help margins," Cowen &Company said in its recent note. When contacted, a TCS spokesperson said: "Salary hikes in TCS next fiscal are likely to be lower than FY09. Wage hikes in India in FY09 were 10% as against 15% in FY08."

The IT industry in India is under tremendous pressure especially with the downturn in the US and European economies, and order flows dwindling. Companies are seeking to reduce their operational costs through various measures. One of key component of reducing costs for the IT companies will be wages as this accounts for nearly 40% of their operating costs.

For now, the other IT services majors like Wipro has already announced a 7-8% hike in wages for its offshore employees while for Infosys it has been in the range of 11-13%. According to Amitabh Das of Vati Consulting, the average hike for the IT industry in the current calendar year has been in the range of 8-10%, down from the previous year's level of 15-18%. In the recent past, wage hikes were in the high double digit percentage owing to a higher demand for skilled IT professionals.

Source: EconomicTimes