Average pay takes a hit

SALARIES: Staff increases in the top IT firms hurt wages per employee.

The Big Four information technology firms have been recruiting at a scorching pace, resulting in higher wage bills. That's predictable, but what is not is the fact that the average salary per employee has declined over the past four years (2002-03 through 2005-06).

Consider the figures. Tata Consultancy Services (TCS), Wipro, Infosys Technologies and Satyam Computer added 141,224 employees in the last four years. The pace of employment growth will go up further, with these companies proposing to hire a whopping 82,500 employees in the current year.

Infosys plans to hire 25,000 employees across geographies, TCS plans to add 30,500 while Satyam expects to hire 12,000 and Wipro might take in over 15,000 engineers.

Despite the sharp rise in employment (salaries have increased four-fold, compared to a three-fold increase in revenues), the operating margins have remained at around 30 per cent in the last four years. As our research shows, this has happened because the average wage per employee has declined in the last four years.

The top four IT companies paid salaries and wages of Rs 16,456 crore in 2005-06, at an average rate of Rs 9.70 lakh per employee per year, compared to an average wage bill of Rs 12,374 crore at an average rate of Rs 10.24 lakh per year in 2004-05.

The total wage bill of Rs 6,057 crore for three companies in 2003-04 (TCS has been excluded for non-availability of past data) works out to an average rate of Rs 10.75 lakh per employee.

In 2002-03, Infosys Technologies, Wipro and Satyam had an aggregate salaries bill of Rs 4,501 crore, at an average rate per employee of Rs 11.39 lakh per year. The wages have been worked out by dividing salaries and wages for the year by the average employee strength for two years.

Infosys, which added 42,000 employees over the past four years, paid Rs 4,257 crore in salaries for 44,733 employees (average for two years) at an average of Rs 9.52 lakh per year, compared to Rs 10.19 lakh in 2004-05 for 31,192 employees and Rs 12.56 lakh a year in 2002-03 for 13,307 employees.

Wipro, which added 38,515 employees over the past four years, saw its average cost per employee declining from Rs 10.88 lakh in 2002-03 to Rs 9.96 lakh in 2003-04 and further to Rs 8.89 lakh in 2004-05. The company paid Rs 4,385 crore in 2005-06 at an average rate of Rs 8.75 lakh per employee.

TCS, for which financial details are available for two years, also showed the same trend. TCS paid Rs 3,866 crore in 2004-05 (an average of Rs 10.87 lakh per year) to its average employee strength of 35,557. It paid Rs 5,114 crore to an average of 51,912 employees at Rs 9.85 lakh per annum in 2005-06.

Satyam Computer, which has 26,511 employees (up 17,868 in the last four years), seems to be biggest paymaster among top four IT companies. Satyam paid wages of Rs 2,701 crore to 22,838 employees in 2005-06 at an average cost per employee of Rs 11.83 lakh per annum. This compares with Rs 12.04 lakh in 2004-05 for an average employee strength of 16,598.

The operating cost per employee has also been declining. Operating cost per employee for the top four firms declined from an average of Rs 19.08 lakh in 2002-03 to Rs 16.23 lakh in 2004-05 and Rs 15.94 lakh per annum in 2005-06.

Infosys Technologies cut its operating cost per employee from Rs 17.08 lakh in 2002-03 to Rs 14.74 lakh in 2003-04 and further to Rs 13.15 lakh in 2005-06. Wipro pruned its operating cost per employee from Rs 19.08 lakh in 2002-03 to Rs 15.94 lakh per employee in 2005-06. Satyam eased its operating cost per employee from 16.27 lakh in 2002-03 to Rs 13.76 lakh in 2005-06.