The largest impact of a booming economy and a steadily growing IT industry is on the job market. Last fiscal, the IT industry which includes both export and domestic, added 741,000 people, an overall growth of over 16%.

TCS closed the last fiscal at a headcount of 66,480 employees. TCS's gross and net recruitments at 27,377 and 21,140 respectively are one of the largest in the industry. TCS is likely to add another 30,500 people this fiscal. Satyam Computers added 7,899 people taking its FY 2005-06 total headcount to 28,694. Patni made 2,154 new hires of which over 35% were lateral hires. Sasken largely concentrated on lateral hires.

Freshers, By Choice
A powerful trend in recruitment last fiscal was the intensity in fresher hires. TCS made13,776 fresher offers which was over 65% of the net recruitments. One of the largest recruiter of freshers this year was Infosys with 75% of the new hires being freshers. Nearly 65% of Patni's recruitments were freshers as well.

The rise in fresher recruitments is driven by multiple factors. Companies prefer to train and create specialized talent pool right from scratch. It is also economical to tap into the huge resource available, to meet the manpower crunch in the industry. And it operates as a powerful metric to reduce average age and salary cost.

There are pitfalls to hiring freshers as well. Deals are becoming larger and more complex. Any slippage in delivery within a competitive offshore space could prove costly. The risks can be countered by increasing bench strengths, longer training cycles and greater use of shadow resources such as an un-billable person who can learn on the job.

Foreign Recruitments
TCS increased foreign hires from 3.5 % last year to 6.5% this year. The majority, if not all, of its HR people are local recruits in places like Hangzhou, Uruguay, Budapest, among others. Today, 6.5 % of TCS's workforce originates from 52 different nations. Infosys will see over 100 graduates from US universities join the company in India this July.

The industry average of fresher recruitment is around 60%. In case of smaller companies, this stood at 35-40% last year

The burgeoning growth of the IT and ITeS industry saw companies expand operations in newer towns and cities and the nature of work gravitated to higher-end of the value chain. Pressures on talent and profitability increased in 2005 and companies looked at ways to establish competitive advantage. Organizations created progressive practices to support continuous development of their employees. Movement to tier-2 and tier-3 cities has expanded the talent base, but on the other hand, the shift from low-end business processes to higher value knowledge-based processes has amplified the challenge of hiring specialized manpower. Outsourcing companies are now falling prey to increasing wage costs for specialized skills. The need to constantly align reward practices to the market continues.

Crunching Numbers
The average growth in compensation levels last year was roughly 14-15%. This is fairly high, by industry standards. Indian compensation levels have been rising in the last couple of years. In fact, the declining cost arbitrage is a cause of concern for the industry. For TCS, the average compensation for an India-based employee is between 11- 15%, while for the other geographies is between 4-5%. Infosys increased offshore salaries by 14-15% and onsite salaries by 3%. The average compensation at the entry was around 10%. However, companies like Infosys and HCL Technologies hiked entry-level payouts by around 15%. Google has been most generous when it comes to the size of the offers during campus placements. The median offer received at the IITs was around Rs 4 lakh, while it was around Rs 2 lakh for the regional engineering colleges.

Salary structures are a derivative of multiple factors: skill, complexity, experience, productivity goals and special domain or process expertise. Organizations are striving to align their compensation with their business strategy by linking rewards to these critical factors across all levels. There is a growing trend towards differentiated total rewards practices based on specialized skill and complexity. Last year, the IT industry paid premiums for specialized skills at the hiring stage and the quantum payout was often left upon the recruitment manager's discretion. Fixed pay ranges were devised and employees with hot skills were placed in a higher quartile within the same range. Other methods adopted by the industry to retain such employees were hot skill allowances, sign on bonuses and frequent salary revisions.

Performance-based pay is gaining ground in the industry. There has also been a continued trend of a cash-heavy compensation. Organizations in this sector are increasingly designing compensation structures, which are tax friendly and allow employees to exercise their choice of benefits through a single flexible allowance. However, this may change this year if the stock market continues to put up a shaky performance.

The compensation differential between MNCs and Indian companies in the IT services space is marginal. However, MNCs doled out as much as 30% more on an average as compared to their Indian peers in the product development space. Relevant skill sets were also inadequate in the R&D segment. Another interesting differential came up in the CEO salary category. In IT services, the top companies that account for nearly 80% of the business are promoter driven, with TCS being the only exception. CEO salaries in such companies do not reflect the trend in the industry. However, this differential was anything between 50-100% when it came to mid-sized companies. 

Skills that Matter
The demand for skill sets remained more or less unchanged last year. Java, C and C++ stayed at the top. For databases, it was largely --Oracle while SQL was the preferred choice in the Windows environment. Specific skill sets such as enterprise package implementation expertise, data warehousing and J2EE have gained prominence in the recent past. In the OS space, it was largely Unix and its different forms that ruled the roost. There has also been a high demand for .NET and for the wireless domain. Mainframe is also back in action.

A segment that is expected to attract specialized skill sets this fiscal is remote infrastructure management.

The Present and the Future
The IT industry opened its doors to plain science graduates for application support, testing and maintenance. There are two reasons for this: vanilla testing and maintenance jobs do not require engineers; the cost of hiring  science graduates also works out to be far lower.    

A significant impact of the turbulent world economy and high oil prices could adversely affect the overall sentiments this year. Average increments, which have gone up in the last two years, could slow down this year.