IT industry faces recession on US woes

BANGALORE: Young technology professional Rajesh Talukdar was expecting a salary hike of 30% this year. His hopes were punctured last week when his team head indicated that none in his project would get double digit increments and also that some would not even be considered for a hike.

Industry observers say the IT sector is heading towards a recession which would be worse than the one it had witnessed during the dot.com bust days. "Over 60% of the industry is US-centric. Recessionary trends are becoming visible across Europe as well. The economic depression of 2001 was mainly due to a tech meltdown; today the recession is global and across verticals. So it will hit the industry harder and it will last longer," says Mamtha Jain, an independent cross-border business analyst.

In recent years, at least 30% increment was given to the top 5% of the employees. This is now expected to fall to less than 15%. About 20% increment was given to 20% of employees, which now is expected to fall to single digits. About 50% of the people used to get 10% increment; they may now get a marginal hike. The final 25% may get no increment at all.

According to Mohan Menon, MD, Sentient Consulting, a people acquisition advisory, only a few brave companies will give double-digit increments. "For performers, increments will be in the range of 8% to 12%. Apart from the recession, it���s also the election year in the US and hence a lot of decisions are being put on the back burner," Menon says.

The industry was planning an "increment correction" in India even before any sign of a recession was visible. "The annual increments were expected to slip into single digits in the next couple of years. But looks like it���s already happening," said Madhav Sharma, staffing head of a tech firm.

Some enterprises that followed a six-month appraisal/increment regime are moving into an annual mode. "It saves them substantial cash and time in terms of processing," said the HR head of a tech firm.

The slowdown in hiring and lower increments are having an interesting by-product. Techies who used to flaunt three or more offer letters at a time a quarter ago, are finding it tough to find attractive options outside.

The attrition levels in many cases are said to have fallen by half, from an average of 22% previously. "This has brought a lot of respite for HR heads," said B S Murthy, CEO, Human Capital.