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With Infosys reportedly increasing the pay packages of senior executives, including executive vice-presidents and a few vice-presidents, threefold, the Indian information technology (IT) services space might well get a new benchmark.
While the company isn’t commenting on the move, sources say it might already have effected, or be in the process of effecting, a significant increase in the compensation packages of its senior executives.
According to reports, the annual salaries of executive vice-presidents and a few vice-presidents have been raised threefold to about Rs 6 crore ($1 mn). Those seeing a rise in their pay packages include some of the recent recruits from German enterprise software maker SAP, the previous employer of Infosys chief executive Vishal Sikka.
“After this, you might see at least 30-40 executives in other Indian IT firms joining the $1-million salary club,” says Kris Lakshmikanth, chief executive and managing director of executive search firm Headhunters India.
Most experts agree, saying this is a step in the right direction, as it will help Infosys secure access to global talent and restrict senior-level exits. It will also drive employees to perform better and enter the league of achievers.
“What we are seeing at Infosys is a continuation of what it has done, in terms of hiring its chief executive,” says C K Guruprasad, principal (global technology & services), Heidrick & Struggles.
“Clearly, Infosys wants to be compared with global multinational companies. So, it is moving into that league by breaking away from the mindset that ‘just because we are an Indian company and employing Indians, we should pay them traditional salaries’. It does not work that way anymore because now, talent is global and highly mobile,” he adds.
Infosys did not directly comment on specific queries by Business Standard. “We will disclose these details in our statutory filings, as appropriate, in due course,” it said.
Typically, Indian IT companies pay lower compensation packages to senior executives such as vice-presidents and senior vice-presidents, compared to their global counterparts. Sources say those at similar positions in IT services businesses of companies such as Accenture, Dell, HP, CSC and Capgemini are paid much more.
Among offshore-centric IT services companies, the compensation packages for such posts at Cognizant are considered the best, followed by Infosys, HCL Technologies, Wipro and Tata Consultancy Services (TCS). However, TCS offers other benefits, too. “At TCS, the retirement benefit is fantastic,” says a senior executive of an Indian IT services firm. The longer one worked at TCS, the more benefits she/he got, the executive added.
Experts say much of the rise in compensation at Infosys might be linked to performance; these could be subject to achieving specific targets.
While about half the total compensation of the senior leadership at Infosys has traditionally been linked to performance, experts say now, the variable component might have risen to 60-65 per cent.
When Vishal Sikka took charge as the company’s chief executive and managing director in August, he became the highest paid chief executive in the Indian IT services sector ($5.08 million). A major chunk (72 per cent) of his overall compensation package was linked to performance.
“I need to get a better view on how this (salary increase for senior executives) is being structured. But I think at least 30-40 per cent of this will be based on performance. Also, there will be certain amounts that are more of a retention bonus---they don’t get paid all this upfront, but in a staggered manner, over a period of time,” says Guruprasad of Heidrick & Struggles.
The fat pay packages wouldn’t have much impact on the profit margins of the company, as a major chunk of the compensation increase is expected to be linked to targets. “It creates tremendous pressure on the guy who draws that kind of a salary,” says an analyst from a domestic brokerage firm.
“Now, everyone will be pushed to the corner to perform. Besides, they know there won’t be many players outside that can pay them this kind of a salary.”
STAYING PRICE
