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India IT companies to raise freshers′ salaries

For the first time in several years, India′s top software services companies are raising salaries for fresh graduates recruited from campuses, as they look to revive a lukewarm relationship while adjusting to cost pressures and competition for talent from startup firms.

A few weeks ago, India′s biggest software company Tata Consultancy Services did something it has never done before — visit campuses of top engineering colleges a few days before schedule and kickstart the campus hiring process to ensure it got the pick of entry-level talent, according to executives and placement officers aware of development.

In the bargain, TCS also bumped up salaries for fresh engineering graduates by up to 10%, said the placement officers. And TCS is not alone. USbased Cognizant, which has most of its 218,000-odd employees in India, also increased salaries for fresh graduates.

Unlike until even five years ago, Indian information technology companies are no longer the employer of choice for young graduates seeking a lucrative career.

Companies are struggling for growth momentum, automation is transforming the way software is created and delivered, and startups flush with cash are luring graduates in search of money, excitement and prestige. Companies such as TCS, which have for years enjoyed the exclusive ′Day 1′ slot in campuses that helps them scoop up the best talent, are now desperately trying to ensure they latch on to that position while growth rates across the industry are slowing down and top clients such as General Electric (GE) and Citigroup are asking vendors to do more with less.

"TCS and Cognizant have increased compensation offered at engineering campuses by up to 10% to a range of Rs 335,000-350,000 per annum. This increase in entry-level wages comes after a gap of seven years. Increase in entry-level compensation is surprising noting significant surplus of engineering talent," said Kawaljeet Saluja and Jaykumar Doshi of Kotak Institutional Equities in a September report.

Reviewing market

TCS said it has followed all campus placement norms and this year has been no different from previous years. "We did what we do every year about visiting campus and we constantly review the market, and based on feedback received, we revise our compensation to align with the market demand," a TCS spokeswoman said in an email response.

India′s $146-billion IT industry hired 252,000 graduates in FY15 as against a supply of 1.45 million engineers. "Possible attribution of the increase could be long-pending entry-level wage correction and/or to enhance ability to attract talent from top-tier engineering institutes. We expect other companies to follow suit," the Kotak report said.

Experts attribute the increase partly due to increased competition from startups that are offering more attractive entry-level packages, but mostly since none of them wants to miss the bus on hiring the best talent from top colleges. "Top companies now are more desperate to latch on to their ′Day-1 slot′ status across the 100 best colleges — and hence increasing salaries makes sense.

The ′Day-1 slot′ status is also used as a sales pitch," said Anshuman Das, managing partner at Longhouse Consulting, the executive search division of recruiting firm CareerNet.

′Two-tier approach′

"Very soon, most companies will have a two-tier approach to hiring, in which one bracket will be reserved to hire people in traditional areas such as software application development and a second bracket with higher salaries for people who will work on newer areas such as digital," Das said.

A Cognizant representative confirmed the company increased salaries for new graduates by around 10%.

"Cognizant has raised entry-level compensation for engineers from Rs 301,500 to Rs 335,005 per annum to make it more competitive," a Cognizant spokesperson said in an email. Infosys COO UB Pravin Rao said during a recent investor conference that his company is trying to take a different approach by giving internship opportunities to those in the final year of their course, or paying a higher stipend.

"One thing people are talking about is giving Rs 3.3 lakh as a starting salary for new entrants. But today we are not very far behind. We are already at 3.25 lakh or something," he said.