MUMBAI -
In a shift towards a quality-based economy rather
than one based on cheap labor, India had the
world's highest salary increases last year,
according to a survey.
Increases in
salaries rose to 15.1% last year from a 14.4% gain
in 2006, with similar growth expected this year,
according to the 12th annual global salary survey
by Illinois-based head-hunters Hewitt Associates.
The country's salary growth was over double the
global average, estimated at 6%, says the report.
Reflecting the boom parts of the economy,
real estate, infrastructure, retail,
telecommunications, energy and the financial
sectors reported the highest salary increases. The
real estate and infrastructure sectors led the
pack with 25.2% gains and are
expected to maintain similar
levels this year.
In dollar terms, India
Inc's senior executive take-home pay still falls
well short of that garnered in Europe and the
United States. Chief executives in a S&P 500
company took home US$14.8 million as average
annual compensation in 2006, according to the
Maine-based corporate governance body Corporate
Library.
In comparison, India's
highest-paid 15 top-level executives averaged $2.5
million in annual salaries for the fiscal year
ending in March 2007. Even so, Mukesh Ambani, the
largest shareholder of Reliance Industries, earned
$6.13 million in annual wages as a chief
executive, the highest among 10,000 executives and
directors in over 1,200 Indian companies,
according to a Press Trust of India report in
September 2007.
Chief executives in
India's privately owned banks earn a relatively
meager $750,000 annually on average, compared with
a US financial sector chief executive officer
(CEO)at $2.3 million. India's manufacturing sector
CEOs average annual incomes of $125,000, says
Ganesh Srinivasan, a corporate human resources
blogger.
A sporting auction this month,
however, may signal an even steeper jump in
compensation for the country's top earners. India
was stunned by a $40 million auction in Mumbai on
February 20 to secure leading cricket players for
the newly launched Indian Premier League. Talented
rookie Indian cricketers such as 22-year-old Robin
Uthappa and 20-year-old Rohit Sharma bagged
upwards of $800,000 per season for a 44-day
season. That could be enough to make India Inc's
upper echelons sit up and revalue their own worth,
with a possible fallout seeing more top CEOs
breaching the $1 million mark by 2009.
Such corporate salary riches of course go
to only a tiny segment of India's population, with
over 300 million workers - or over 90% of the
workforce - struggling in the unorganized sector
with average daily pay of $1.50 as
government-fixed minimum wages.
Construction workers are among the most
exploited in India's unorganized sector, with the
glitzy glass and chrome office buildings that CEOs
work in usually built by families of migrant
workers brought in by agents for a pittance.
Cheap domestic labor in cities usually
comes from sprawling urban slums, with a maid in a
metropolitan city household averaging $10 monthly,
with no off days. Even that paltry sum has to go a
long way, with a kilogram of wheat and potatoes
costing $1.
With urban rising incomes,
busier work schedules and a need for household
help, placement agencies for domestic services
have spawned across major urban areas; the online
service of Mumbai-based housewife Manju Agarwal's
maidservice.in, for example, offers maids, cooks,
drivers for a one-time "human resource management
consultant" service fee of $74. The housemaid gets
a better deal than $10 a month, and some of them
manage to own cell phones.
Despite record
salary increases, the better pay of India Inc
managers and further down the white-collar chain
has yet to prompt extended lay-offs by companies
seeking to rein in costs, though the gains in some
sectors may slow for one reason or another.
Ironically, the worst affected may be the poster
boys of India's economic rise in the past decade,
the information technology companies. The IT
sector, dependent for over 40% of business on
outsourcing contracts from the US, is expected to
suffer the lowest salary growth of 14% in 2008.
"The most affected companies in salary
hikes are those billing in US dollars instead of
rupees due to the weakening of the rupee against
the dollar," says Srikanth Iyer, chief executive
officer the Bangalore-based educational software
producing firm Edurite. Iyer believes the salary
growth is changing India's image as a cheap labor
market. "It's time we moved up the value chain,"
he says.
The Associated Chambers of
Commerce and Industry of India (Assocham), an
industry body, confirmed in its report released on
February 20 that Indian IT firms are hiring more
but paying less
India's multi-billion
dollars IT giants, including Infosys Technologies,
Satyam Computer Services, Tata Consultancy
Services (TCS) and Wipro Technologies, reported a
22% cut in salary bills during October to December
2007, compared with a staggering 45% increase
during the third quarter of the 2006-07 financial
year.
Software giant Infosys nearly
doubled new recruitment to 11,683 to reach total
staff strength of 88,601 on December 31, 2007, but
its wage bill soared by only 21% compared with 43%
during the same period in 2006 .
The $4.3
billion TCS, India's largest IT employer with over
100,000 workers, spent $497 million in salaries
between October and December 2007, compared with
$519 million for the corresponding period in 2006.
Yet it maintained its annual recruiting average of
7,500 new employees.
Human resource
analysts point to a more democratic trend in
salary growth in India Inc, with junior and middle
management employees gaining the most in recent
years. Junior management staff and middle
management grabbed the highest salary hikes of
around 15-16% in 2007.
Not surprisingly,
the salary increases run alongside rising
attrition rates, with more workers staying for
shorter periods in the same job. Attrition hit the
insurance sector the most at 35.2%, followed by IT
companies at 28.9%, the hospitality industry at
27.1% and retail at 24%, according to the Hewitt
study.
The fast-moving consumer goods
sector, energy, automotive, electronics and the
chemicals industry reported better luck in
retaining staff.
"Asian talent has
unprecedented ambitions of fast-track growth and
the willingness to toil for it," Nishchae Suri,
principal researcher, Hewitt Associates, remarked
in a media statement. Suri expects organizational
salary structures to evolve creatively to retain
talent, ranging from employees being able to name
specific incentives to custom-made salary
structures.
On the other hand, the
frenzied hunt for new talent is hitting
desperation levels, with companies launching
campus recruitment drives in India's leading
engineering and management colleges not just among
final-year students as in previous years, but also
among students in their penultimate year.
Average salaries for on-campus recruitment
of management students went up by 25% this year
over 2007. The premier Indian Institute of
Management, Kolkata, averaged $35,000 in annual
pay for student placements. Whether that will help
to encourage the next generation of Indian
managers to bridge more successfully the vast gap
dividing the country's well-paid minority and
exploited vast majority is another matter.
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