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.
Copyright 2008 Asia Times Online