Salaries of Chief Executives at India’s top five IT companies surged by over 160% in the last five years, while freshers have seen an increase of less than 4% during the same period, according to data sourced by Moneycontrol.
While the median annual pay of top 5 Indian IT CEOs was up 160 percent at almost Rs 84 crore in FY24, the median salary package of freshers grew just 4 percent — from Rs 3.6 lakh to Rs 4 lakh — in the last five years. The companies covered include TCS, Infosys, HCLTech, Wipro, and Tech Mahindra.
The data comes amid softening demand in India, where corporate profits haven't kept pace with wage growth in the last decade. The Indian IT services sector is the largest job creator in the private sector and a key engine of consumption and investment.
"For (IT) margins coming down, why are they rewarding CEOs so much? That is the question you must ask," former Infosys board member and Chief Financial Officer Mohandas Pai told Moneycontrol. “I don't know why the board is rewarding CEOs and top 1% of people more and more while exploiting the bottom of the pyramid. It's very wrong.”
In the second quarter of FY25, the surprising slowdown in India’s GDP growth to 5.4 percent may either be a temporary phenomenon or show more serious structural challenges, Chief Economic Advisor (CEA) V Anantha Nageswaran said at an event. He added then that there has to be a balanced distribution of the profit pie between capital and workers.
While annual reports of IT major Tata Consultancy Services, Infosys, HCLTech, Wipro, and Tech Mahindra, were released earlier, they have assumed significance in light of stagnant salary growth and its impact on economic consumption.
Another yardstick of measuring the top and bottom of the employee pyramid - the ratio of pay between the CEO and the fresher –makes the gap more significant. It is 1,702 for Wipro, 1,383 for Tech Mahindra, 707 for HCLTechnologies, 677 for Infosys, and 192 for TCS.
A report prepared by FICCI and Quess, highlighted in the Indian Express revealed that the compounded annual growth rate (CAGR) for wages in the engineering, manufacturing, process, and infrastructure (EMPI) sector between 2019 and 2023 was the lowest at just 0.8 percent.
Low Salary Rationale
The Indian IT services majors reported a full-year headcount decline in FY24 together, for the first time in at least 20 years, plunging by almost 64,000. Amidst an uncertain demand environment and macroeconomic headwinds, IT companies started focusing on improving utilisation rates, expanding margins, and deploying benched employees.
Gaurav Parab, a principal research analyst at consulting firm NelsonHall, attributed the disparity to the pyramid model, which relies on a massive supply pool of freshers. “The bottom of the talent pyramid is hit by dilution due to high availability. Entry-level talent requires significant investments in training, which drives low compensation costs,” Parab said.
He also pointed out that CEO salaries align with global CXO benchmarks, as enterprises strive to remain competitive in a global market.
Many other experts also agree with Parab.
Kamal Karanth, Co-founder of Xpheno noted that the industry’s cost advantage relies on controlling fresher salaries, given high attrition rates and the poor quality of higher education necessitating extensive training. To manage discontent, companies have offered accelerated career streams and onsite opportunities, though the latter has diminished in recent years.
India produces approximately 15 lakh engineering graduates every year.
The IT sector saw salary hikes in 2021 and 2022 due to a surge in demand for tech talent, according to Kapil Joshi, CEO of Quess IT Staffing. However, Joshi added that global economic uncertainties in 2023 have led to a slowdown in salary increases.
Meanwhile, the high CEO-to-median employee wages ratio is not restricted to IT providers and is a topic of debate across the world. Experts say the easy route is to paint this with a broad brush of moral judgment, but one should look at other factors that are very unique to the IT and technology world.
“The technology sector is brutal and demands a clear executive vision and track record for not only success but your very survival,” Parab added.
Inflation, Interest Rates, Inequality
Pai criticised the doubling and tripling of CEO salaries over the last five years while freshers' salaries have remained stagnant.
In fact, wage hikes in the IT industry have generally been at or below the rate of inflation, which has negatively impacted the middle class.
“While the cost of living has surged—with school and college fees rising by 60-70% in the last five years—freshers' salaries have not kept pace. This is why the middle class is getting hurt now because their discretionary money to spend has come down," he further explained.
Pai wants freshers' salaries to rise to at least Rs 5 lakhs annually, arguing that IT companies are profitable enough to make such adjustments. "Boards are rewarding CEOs and top executives more and more while neglecting the bottom of the pyramid. It’s very wrong," he stated.
Experts point out that wage hikes across industries have not kept up with inflation, and many contractual workers continue to earn minimum wages that have not been revised for years. Moreover, high interest rates hurt consumption without addressing the real causes of inflation.
Also read: MC CEO Pay Report: How much were India Inc top bosses paid in FY24?
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