Employee pay surges as IT firms, startups vie for talent

Geeta M*, a data scientist with six years of experience, was recently hired by a startup for Rs 46 lakh. According to experts, the hike is 60 percent more than market rate of Rs 30 lakh.

In another instance, a cybersecurity professional with two-to-three years experience was offered Rs 16 lakh by a captive (the Indian business unit of an overseas enterprise). The professional was earning Rs 8 lakh in his/her earlier job.

This wage inflation is becoming a norm for certain job profiles such as data scientists and some industry players are raising red flags.

Manas Fuloria, CEO, Nagarro, an IT consulting and services firm, said this wage inflation is likely to become an issue going forward as an increasing number of heavily funded startups are willing to pay a premium for the right talent.

While the company is not facing any issue yet, other smaller firms and sometimes even large ones are having a hard time finding talent in emerging technologies within their hiring budget, Fuloria added.

A HR executive from an IT services firm in India told Moneycontrol, “What is happening is that captives and funded startups, with deep pockets, are paying a premium, making it difficult for company like ours to match up.”

While the company is willing to pay a 20 percent hike to those joining, in line with market hikes, a 50-60 percent increase is a lot to handle. This is quite substantial considering that the company needs to hire more employees with similar price tags.

Why are some firms willing to pay such a high premium? The answer, experts said, lie in the fast changing technology landscape and so few employees equipped with these skills.

Kamal Karanth, co-founder, Xpheno, a specialised staffing firm for tech and engineering talents, said companies have come to realise that skills are transient and the hiring landscape has changed to accommodate that.

This changes a way a company hires in two ways: the number of just-in-time hires or contract employees have increased and payment of a premium for skills that are in high demand.

Jobs that are in high demand are data scientists, cybersecurity specialists, artificial intelligence, machine learning and robotic process automation. As companies take on more digital transformation projects, tasks that require knowledge of these emerging technologies are on the rise.

Supaul Chanda, Business Head, TeamLease digital, an IT staffing firm, said, “There are not many people with these skills and vacancies have been lying empty for a few months before they are filled.”

In an earlier conversation with Moneycontrol, Ajay Shah, Head- Recruitment Services, TeamLease, said out of 100 jobs that need skilled workers, only five are being filled. That leaves the other 95 unfulfilled. “This despite the fact that demand for a skilled workforce is only 10 percent of the total workforce required,” he added.

According to a recent employment survey by the rating agency CARE, the IT sector employed about 12 lakh in 2019. Demand has only increased given the fact that India is a hotbed for tech startup and favoured destination for captives, which are business units of overseas firms that employ eight lakh people in India currently.

All IT services firms such as Tata Consultancy Services (TCS) and Infosys want them. Captives and startups too are looking for them and are willing to pay a premium. This is what's jacking up prices.

The impact of this, Karanth of Xpheno said, would be shrinking margins and results in some firms shutting shops as talent becoming pricier.

This is not worrying trend yet, he said, adding that in the next five years companies will have to brace for this additional challenge as well and equip themselves.