The Hindu Business Line : Salaries up 16 pc in IT services last year

Tax-friendly packages
Organisations in the IT services sector are increasingly designing compensation structures that are tax-friendly and allow employees to exercise their choice of benefits through a single flexible allowance.

New Delhi , March 13

The IT services sector witnessed an average salary increase of 16 per cent and the BPO sector 16-18 per cent in 2005, although the salary rise was less dramatic at the entry level, according to a Nasscom-Hewitt Total Rewards Study.

"The salary increases were not very high across all levels. The salary increase at the entry level was five per cent in the case of BPOs and 12 per cent for IT services. This implies that there is not much of a skill shortage at the entry level, although availability of skilled and experienced managerial talent remains an issue," said Mr Sunil Mehta, Vice-President of Nasscom. Continuing with the trend of last year, IT professionals working in Bangalore and NCR bettered the national average.

"Bangalore and NCR are among the highest on the location index with each reporting a 4-6 percentage point increment over the national average, followed by Hyderabad. " the study said.

Pressure on talent and profitability increased in 2005 and companies looked at ways to establish competitive advantage.

During the year, IT organisations revealed a similar cash orientation as last year with the average cash-to-benefits ratio across levels being 78:22. Organisations in the IT services sector are increasingly designing compensation structures that are tax-friendly and allow employees to exercise their choice of benefits through a single flexible allowance.

"Although the average fixed pay to variable pay ratio continues to be 91:09 across levels in 2005, the variable pay as a percentage of total cost to company across levels has seen a rise in 2005, wherein more and more organisations across the comparator sample are directly linking the employees' compensation to his/her performance," the report said.

Of the 91 IT organisations approached, 27 per cent reported a formal differentiation based on hot skill sets, while 41 per cent said that they clearly did not differentiate between skills in specific job families. The rest maintained that they had no formal policy for differentiation, but differentiated compensation basis criticality of resource requirement.

Within the ITES/BPO space, the average salary increase in the sector across levels was in the range of 16-18 per cent. "ITES organisations in 2005 revealed a similar cash orientation as last year with the average cash-to-benefits ratio across levels being 76: 24."

Here too, NCR and Bangalore figured on the top of the location index, with both reporting a 3-6 percentage point increment over the national average, followed by Hyderabad.

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