IT vs Non-IT sector: How entry-level salaries have evolved over 5 years

Flush with funding, startups have been matching or exceeding the giants in terms of pay for freshers and others. (Illustration by Suneesh Kalarickal)

When Vipin Desai (name changed) was beginning his professional journey as a software engineer, he looked for an industry that would give him a career with a high trajectory. IT services, he believed, was that industry.

Six years later, when his younger brother Suyesh Desai was set to follow in his footsteps, Vipin realised that his sibling would be at the same CTC he was at in 2016, after adjusting for inflation. Meanwhile, a distant cousin with the same degree got a higher CTC — but she had chosen to work in the Auto sector. And that gave Suyash pause for thought.

Fresher salaries in the IT industry have been stagnating for a decade. While the median annual pay of CEOs in India’s largest IT companies grew 835 percent between FY12 and FY22, the median salary package of freshers grew just 45 percent.

The Indian IT sector has been a major job creator for decades and leads in terms of offering better packages to engineers. It recorded 15.5 percent growth in FY2022, the fastest in more than a decade, to touch $227 billion.

Battle for IIT talent

Traditionally non-tech firms have had to pay a premium to hire IIT talent but this is now changing due to the downturn in demand for tech talent, per professional services firm Aon.

Between 2016 and 2021, the average salary for entry-level jobs for IIT engineers in IT firms stood at 14.5 LPA, followed by colleges in Tier I cities (11.3 LPA), Tier II cities (8.6 LPA), and Tier III cities (5.5 LPA). The figures are for CTC, which includes fixed salary, variable pay, and joining bonus.

“Non-IT firms are now trying to scale digital capabilities and going back to campuses for tech talent again,” says Jang Bahadur Singh, director of Human Capital Solutions at Aon in India.

This is closing the gap between salaries offered by the IT sector vs Non-IT sector, especially in IITs. Non-IT sectors such as manufacturing, auto, retail, BFSI, etc, recorded the highest salary for entry-level jobs for IIT engineers, with Rs 13.9 LPA, slightly lower than IT firms. This is followed by colleges in Tier I cities (9.7 LPA), Tier II cities (7.1 LPA), and Tier III cities (4.7 LPA).

“The Tier II/III campuses are a different story, where they are primarily a hunting ground for IT services companies, who have seen high attrition,” Singh says. “On the other hand for non-tech companies, the hiring is largely for IT support roles, which are non-core and hence we are seeing the gap widening in these campuses.”

Startups exceeding the giants

Flush with funding, startups have been matching or exceeding the giants in terms of pay for freshers and others. Uday Virmani, Assistant Dean at Mumbai-based BITSoM, says it boils down to volume versus value — large IT/ITES firms hire in bulk due to their high level of attrition, and due to homogeneity in the talent pool, their salaries have been flat over the years.

“However, new-age firms in the start-up ecosystem, which are working on the latest technology, despite not having a strong brand presence such as some of the leading IT / ITES firms, have attracted top talent with higher salaries, especially over the last couple of years,” he adds.

That’s mainly because startups want the best talent to work on the latest tech etc. However, there is also a flip side to it. Working in startups is much more demanding, with a poor-work life balance that can sometimes lead to burnout, with the fear of a funding crunch and layoffs always looming.

Further, techies who decided to pursue MBA after graduation​ are placed better. There has been an average increase of 65 percent in entry-level salaries offered at top MBA Institutes during campus recruitment, according to data from staffing firm Zyoin.

“With the current state of the labour market, high-paying salaries will probably continue to be the norm for workers in certain high-paying industries, but entry-level workers won't feel much of a difference,” says Anuj Agrawal, Founder & CEO, Zyoin.