India’s $250 billion information technology (IT) sector is expected to see flat salaries in 2024 underscoring the impact of global headwinds on companies’ operations. Hirings in the sector — considered one of the biggest employers in the country — will also likely stay subdued.
This year, IT companies are expected to give average salary appraisals of 8.4-9%, similar to the 8.5-9.1% average increases recorded in 2023, according to data sourced by ET from a top hiring firm.
The increments will, however, likely be deferred by most companies to the end of the fiscal first quarter, Munira Loliwala, AVP – strategy and growth, Teamlease Digital, told ET. In normal times, salary hikes tend to happen from April.
“The focus in the IT sector now is on stabilising headcount,” she said, noting that the sector will possibly register flat or negative growth in headcount this year as well.
The sector saw salary increments rise from 8.8% in 2021 to 9.7% in 2022, before dipping to 8.5-9.1% in 2023, the data showed.
“Many large MNCs recently did their round of hikes in December 2023, though not very great, which accounted for an average of 7% for most roles,” Loliwala said.
Last year, companies like Infosys, Wipro, and HCLTech reportedly either skipped or deferred increments by several months or rolled them out selectively depending on employee tenure. For instance, in December, Infosys rolled out hikes averaging less than 10% effective November, with some even receiving low single digit raises.
While Infosys excluded junior or mid-level employees from any pay hike, HCLTech and Wipro excluded those in mid- or senior-level roles. Tata Consultancy Services (TCS) had rolled out 6-8% hikes while top performers received double-digit increments.
IT companies have been grappling with a near-decadal low in revenue growth and declining headcount over the past few quarters, with top companies like TCS and Infosys even giving campus hiring a miss last year.
The slump in global demand amid macroeconomic uncertainties and inflation in developed markets led to an unpreceded slowdown in tech spending, with IT firms looking for ways to improve gross margins. Employee expenses are the biggest cost for IT companies, comprising 50-60% of total expenses.
Nevertheless, “in most pockets, IT has the largest disbursement (of hikes) as compared to any other sector today,” Loliwala noted, adding that Global Capability Centres (GCCs) of big multinational companies are now also playing a significant role in tepid hiring by Indian IT companies.
GCCs, which have mushroomed in India in recent years, will likely see average salary hikes of 10-10.1% this year.
According to reports, GCCs currently employ about 1.66 million, 80-85% of which tech talent.
On the skilling front, between 2021 and 2023, two out of every five individuals are engaged in some certification or training programme to upskill themselves, Loliwala said. This was to improve their chances at better appraisals, grade development, and functional development amid increasing adoption of new technologies such as AI.
The rise of tech talent in Banking and Financial Services is also one of the factors driving robust salary increases in the sector, which could see upper-end hikes at about 11.1% this year, she said.
