Tata Consultancy Services (TCS), which employs over 600,000 people globally, is up-skilling in-house talent and evaluating them at a high bar to double their salaries.
The company finds this a better strategy than shelling out very high increments to new hires as the industry has started to come out of a pandemic-induced rally of high employee attrition and massive hikes of over 80-120 percent.
Milind Lakkad, chief human resources officer (CHRO), TCS, told Moneycontrol, “Those two years of instant gratification were definitely there. While we lost people because they were getting X percent more somewhere, we also hired people, not with that kind of increase but there was some increase definitely. We also ensured that internally people get the opportunity to upgrade their compensation through various initiatives, to reduce disparity internally.”
As the vicious cycle of attrition continued, TCS has sought an internal solution by enrolling more employees in its existing programmes across levels of experience to give them a chance to double their salaries — even if the bar of people managing to clear these high-level programmes in the first attempt is only around 10 percent a year.
The pandemic shift
After spending years in single-digit annual increments, trained IT sector employees saw a once-in-a-lifetime opportunity to earn 2-3X of their pay by changing jobs, with the increasing demand for digital transformation and tech adoption by client companies in the past two years. And to manage this talent shortage, IT services firms continued to pay more to backfill, even as existing employees grew increasingly unhappy.
Adding to the employees as well as the sector’s woes, the disparity between salaries of senior leadership and early career employees at IT companies has skyrocketed over the years. According to a previous report by Moneycontrol, between FY12 and FY22, while the median annual pay of CEOs zoomed 835 percent from Rs 3.37 crore to Rs 31.5 crore in FY22, the median salary package of freshers grew from Rs 2.45 lakh to Rs 3.55 lakh, which is only a 45 percent jump.
To this, Lakkad said that the company, which is the largest IT services firm in the country, has been considering raising fresher pay and ensuring 100 percent quarterly variable pay to its employees, especially the juniors.
“Sometimes among the seniors, they will get a hit but most of the time they didn’t, even last year. Three out of four quarters they didn’t get hit last year,” he said.
In terms of annual increments, he said the company gave around 12-15 percent, 8 percent, 5 percent, and then 1.5 percent increments depending on their performances.
“Having said that, do we need to do anything more (to reduce pay disparity)? All of these programmes we have is a better strategy than a blanket change of salaries at the bottom. Even having said that would we think about changing the salaries at the bottom? The answer is yes. But when will that happen is yet to be determined, there is something we are mulling on,” he told Moneycontrol during a recent post-earnings interview.
TCS’ main programme, Elevate, has over 400,000 registered employees with 0-12 years of experience. Employees in the first three years of experience category go through a prescribed programme from TCS to help them become full-stack professionals, also including soft skills training. Those who clear are able to cross the high bar assessment and double their salaries immediately.
At present, TCS provides two categories of fresher salaries — Rs 3.36 lakh per annum (LPA) in the Ninja pay category and Rs 7 LPA in the Digital category. In FY23, TCS added over 44,000 freshers.
Lakkad expects employees with 4-12 years of experience to become specialists when their programme ends. They could specialise in technology, cybersecurity, IoT, analytics and artificial intelligence. Employees even get to pick the industry they want to focus on.
However, the catch here is, for this middle category the pay hike doesn’t happen in a go. “So basically they get a part of the kicker and will get the remaining kicker when they get deployed to that role,” he said.
Upgrading the leadership
According to Lakkad, despite the ongoing high churn, around 125,000 of its current workforce have been with the company for over 10 years. So employees in the 10-20 years plus experience bracket are sent to upskill themselves to become growth and transformational leaders in the company.
TCS invites international business schools to train this category through experiential learning. This is a critical category for TCS, given the existing connections these employees have built with key customers over the years.
Lakkad said the company prefers training and deploying these employees in senior roles rather than hiring externally.
“Over the years, while these employees have added a significant value to the company, some of them may have lost it on the market relevance skills, which are required today. So how do we basically ensure that they don’t get left behind? They learn the latest technologies, whether it is cloud, AI, cybersecurity, etc and get deployed to different jobs,” Lakkad said.
In FY23, for this senior category, around 40,000 employees signed up. About 15 percent of them have been certified and deployed in new roles. Lakkad plans to deploy another pending 1,000 in the next 18 months.