ITES sector: Salaries on the ascent

Sudipta Dev / Mumbai

Salary trends in the ITES sector has been a topic of much scrutiny and debate in the last few years. A Hewitt Associates survey states that in the APAC region the highest salary increase was in India, in 2003, while within the country itself it is the employees of the ITES sector who boast of the steepest salary hike (14 percent). The year 2002 also showed a similar trend. The moot question is—is this increase a normal reflection of the times, and how this will impact the industry? Furthermore, in an industry marked by poaching and almost 30 percent attrition rate, will a balanced scenario ever be reached? IT People spoke to many experts to get their views on the subject.

Most industry experts are of the opinion that the trend of high salary rise will continue for the next few years because the industry is in a rapid growth phase. “This is specially in context of the fact that the ITES industry is today facing a severe crunch of middle and senior managers who are experienced in this industry and understand the dynamics. As such there is a stiff competition to attract people in the ITES sector,” says Zia Shiekh, CEO of Infowavz International. Shiekh feels that the current average of 14 percent wage rise is reasonable. At Infowavz itself the average salary hike has been about 25 percent per annum. “This is largely on the back of steep increments for high-performers, who are very valuable in the market-place and we need to ensure that they are not poached by our competitors,” he adds.

The constant change

The salary structure is a derivative of multiple factors. Atul Kunwar, managing director of global outsourcing with eFunds International, lists them: process complexity, experience, productivity goals and special domain or process expertise. “Increasingly salary comprises of a base element of compensation with a significant variable component that is linked to defined productivity norms and is paid out at regular intervals (quarterly and monthly). Additional benefits that accrue to associates include 24 hours cafeteria plus statutory benefits (like PF),” he adds. Salary increases at eFunds International for 2002 to 2003 have been 10 percent.

Gautam Chainani, director of human resources at WNS points out that the transaction processing sector is marginally higher paying than call centre industry positions at the senior levels (managers and senior managers): “An important reason for this is the fact that the transaction processing industry has a large number of foreign bank associated centres that are high paying. Third party centres that cater significantly to the financial services industry. The associates and trainee level salaries in the call centres are higher than the transaction processing. The difference was mainly made through the skill/process allowance and shift allowance.” He concedes that salary increases have been in the range of 15 percent to 20 percent across levels, primarily because of the increases at the middle management level.

“If we dig under the surface, we will find two things happening. On one hand there are established players who benchmark themselves against the market and set themselves at the median. These players, even with median salary vis-à-vis the industry, can attract candidates because of the company brand and other offerings. On the other hand, we have new entrants and the not so established players who peg salaries at a higher percentile. Clearly these are the players who can attract based on salary only. This has led to large scale poaching across companies. In the last year, a number of established players have signed non-poach agreements to address this issue,” says Prakash Toppo, vice president of HR at Global Vantedge.

Impact on the industry

Shiekh believes that the wage differential between India and the Western world (US and UK) remains significant and the rapid pace of salary growth in India is unlikely to impact the country’s competitiveness as India’s labour rates remain one-tenth of global rates in Western countries. Chainani is of the view that in the short to medium term, salary increases will be buoyant with emphasis on take home pays rather than CTCs. However, in the medium to long-term take home pays will stabilise to increases in the range of 6 percent to 8 percent, with significant increases in performance based/variable pays.

The salary factor is affecting the service level agreements (SLAs). Toppo explains: “Most ITES companies are facing a crunch when hiring voice agents. This is happening because a number of young agents today are hankering after salary and hence move from company to company in a short period of time. This is affecting delivery of SLAs to the client. In the long run when this industry goes towards commoditisation, there will be enormous pressure on price. There is a possibility of shakedown because of this very reason.”

Sowjanya Reddy, vice president of HR at 24/7 Customer, is of the opinion that in the long-term if the salary level continues to increase there will be lot of consolidation in the industry as many companies will not be able to sustain the 15 percent hike. “In the short-term it is going to be tough to manage employee expectations—if they don’t get the 15 percent hike, they would look for an employer where their expectations can be met,” says Reddy.

Balanced salary structure

According to Chainani companies will have to review compensation across skill levels and within specific expertise provide for differential amounts for those with higher tenure: “For example there will be some element of salary differentiation based on the tenure of the person on the job, specifically on complex processes, considering that his or her learning curve will have

stabilised over a 12-18 month time frame on that process.” He points out that organisations will need to integrate their performance management systems with the compensation to ensure that productivity levels are maintained, if not enhanced, considering the spiralling wage hike.

Manuel D’Souza, head of HR at Intelenet agrees that a balanced compensation structure has key components such as salary, loans, retirals, conveyance, housing and variable pay (performance pay/incentives). He adds: “The structure should also take into account the various design and delivery features of each of the benefit policies made available by the organisation. While creating a balance it is important to assess what benefits employees perceive to be most important and also how benefits will differ at various levels of management.”

D’Souza points out that at Intelenet, the Performance Management (PM) System is the key process for measuring employees’ performance, linking it to pay and facilitating employee development. He explains that the process appraises past performance, plans for future development in terms of skills and abilities needed to move the individual to achieve higher levels of performance, and rewards individuals who have performed well in the past.

Elango, vice president of HR at Msource is of the opinion that an average increase of 6 percent to 8 percent is ideal. He however feels that if a company has a good brand it makes up for the salary.

Variable pay

According to Sujit Baksi, president (India) and head of global operations at vCustomer, the variable pay factor is the most significant portion of the pay packet. This in fact can vary from 15 percent to as high as 70 percent. The company, which is on a rapid expansion mode often pays to an agent drawing Rs 10,000 salary almost double the amount based on his/her performance.

“In this industry, performance can be accurately measured and an agent can know it at the end of the day. At the higher levels this does not hold, for instance, a team leader has to look after the quality, attrition rate, customer satisfaction. An agent touches the customer, while a manager interacts with the client,” states Baksi.

The variable incentive plan has not completely sunk in as a way of life and agents, believes Toppo: “They would rather leave a company on the basis of fixed salary without realising that after a period of time incentives can outweigh any increase in the fixed component.”

Career growth

Overall compensation structure in the BPO sector needs to align better to both the short-term monetary needs as well as career growth aspirations of individuals, feels Kunwar of eFunds International. “In addition to salary, associates also look forward to career opportunities and the over all earning potential. Compensation structure should include the ability for associates to grow vertically (leaders and managers), as well as horizontally (from simple to more complex processes). So it is important to be able to discuss career path and related compensation element in a defined horizon.” He adds that the compensation structure should also include an element of reward for outstanding performance that could be linked to process improvement/excellence initiatives that an individual or team undertakes.

The emphasis, according to Elango, should be on equipping people for managerial positions, training them to be managers, which will in the long-term strenghthen the industry and consequently the economy. “The focus should be on strong economy, strong competency and skills.”

The primary challenge for the BPO sector remains nurturing talent to ensure that there is a steady stream of professionals entering the industry—a necessity to meet the market demands and also keep the salary structure balanced.

sudipta@expresscomputeronline.com