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Huge salaries: IT firms distorted balance

August 02, 2007 13:13 IST

Sometime last week, I was forced to reflect once again on what exactly determines (and should determine) how much professionals should be paid for a given level of intellect and hours spent on the job. However, the conclusion was the same -- life is not really fair when it comes to compensating in financial terms intellectual potential and efforts put in.

The trigger for this reflection was an apparent dissatisfaction of some of my colleagues in a core vertical in my company who were initially happy with an unscheduled, middle-of-the-year, compensation raise; their happiness, however, was short-lived on learning that colleagues in another vertical had received somewhat higher raises.

As many employers already know, executive compensation is now running amuck in India. Unlike the US and some other developed countries where astronomical compensation is usually confined to CEO levels (and perhaps to a select few in top management), in India this malaise has spread right across middle and even to entry levels and has the potential to distort the overall financial viability for many businesses.

Freshers from leading business schools routinely expect starting compensation in the region of Rs 10 lakh (Rs 1 million) per annum and many get much more even when, ironically, their own professors (including those at IIMs) earn less than this after having put in over 25 years of research and teaching experience.

Systems 'architects' in IT firms, still in their 30s, command compensation in excess of Rs 20 lakh (Rs 2 million) per year while 'real' architects start at less than Rs 2 lakh (Rs 200,000) a year and just a few of them may even hope to reach the Rs 20 lakh annual salary level by the time they hit their 50s.

Top consulting firms routinely offer compensation packages in the range of Rs 50 lakh (Rs 5 million) to Rs 100 lakh (Rs 10 million) per year to mid-level consultant managers having no more than 10-15 years of work experience, largely bolstered by jargon (and not much else, I am afraid, in most cases) acquired mostly at their clients' expense.

Senior doctors in India, barring a few hundred 'branded' ones scattered across a handful of metros in the country, hardly touch Rs 50 lakh (Rs 5 million) per year earnings level and that too without having the luxury of being provided office space, secretarial help, transport and other perquisites a regular corporate employer shells out to its pampered managers.

It must also be kept in mind that a doctor would typically start earning much later in life, and for the first 8-10 years of their professional lives, the income levels remain abysmally low while the working hours and conditions are amongst the most demanding of all professions.

Secretaries working in major cities in India now routinely command compensation levels in the range of Rs 3-6 lakh (Rs 300,000-600,000) per year, while highly talented and trained designers from premier design institutes such as the NID struggle to get placements even at the low end of this salary range at the time of graduation, and most never even reach the Rs 10 lakh per annum mark unless they take up an entrepreneurial route and struggle for years before establishing themselves.

In the rush to grow and be one up on competition, private employers continue to pay scant heed to keeping executive compensation in check. For most of this present decade, IT firms in India were at the forefront of distorting the compensation structure, lulled into complacency with the weakening rupee, little or no corporate taxes on income, and the potential to offer the mirage of stock-option created wealth.

The situation has changed in the last two quarters for them and hopefully, they will make some effort to restore sanity when it comes to salary structures. Other hot sectors creating distortions for employers include emerging ones like retail, banking, and various genres of financial services.

A correction in executive compensation in the retail sector is imminent within 24 months, when severe ensuing competition will very harshly test the mettle of these newly minted retail experts, and eroding margins, forcing the employers to look at every high-cost management position carefully.

In the banking and other financial services, though, there is no indication yet of any let-up in compensation increases across the board.

The examples of inequity in professional India are just too many to list out. How does a talented individual having chosen one of the many very poorly-paying professions cope with the situation? Alas, there is no immediate practical solution that I can think of other than advising such professionals to focus on work that interests them and to come to terms with this ubiquitous irony of the professional life.

A few may be able to make some mid-course changes in their careers but most have to live with the decisions they may have taken decades ago when leaving school for college.

I do, however, believe that with the increasing corporatisation of a number of other services such as healthcare, industrial design, and real estate/architectural design, there will be more parity for professionals in these sectors with their counterparts in others. However, this may still be a few years away.

Finally, a tip to those who can still make some career choices or are capable of reinventing themselves mid-way in their professional lives: bet on healthcare especially the management of the delivery side. The frenzy currently being seen in the retail sector will be nothing comparable to one that will be seen in the healthcare sector within next five years!

Arvind Singhal
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