Freshers’ Average Salary in IT Companies Grew by Just 4% to Rs 4 LPA in 5 Years, While CEOs’ Pay Soared 160% – Report

The widening disparity between CEO compensation and fresher salaries in India’s top IT companies is raising eyebrows, as data from Moneycontrol reveals a 160% surge in median annual pay for Chief Executives over the past five years, compared to just a 4% increase for freshers during the same period.

In FY24, the median pay of CEOs at India’s top five IT firms—Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro, and Tech Mahindra—climbed to ₹84 crore, while fresher salaries grew marginally, from ₹3.6 lakh to ₹4 lakh annually.

Stagnant Growth Amid Industry Challenges

The data comes as the Indian IT services sector faces a softening demand environment. The sector, known as a significant job creator and a cornerstone of economic consumption, reported its first full-year headcount decline in 20 years, with a reduction of nearly 64,000 employees in FY24.

Economic challenges, including rising inflation and stagnant wage growth, have compounded the issue. Former Infosys CFO Mohandas Pai criticized the disproportionate growth in CEO pay, stating, “For (IT) margins coming down, why are they rewarding CEOs so much? That is the question you must ask.”

A very sad state of affairs in IT cos in India. Boards should stop being mercenary, rewarding CEO’s, too 1%, themselves more and more and give a much better deal to freshers and bottom 50%. This is not the culture in which IT service cos grew earlier. https://t.co/er7HQFsZbw

— Mohandas Pai (@TVMohandasPai) December 23, 2024

Pai also highlighted the growing financial strain on freshers and the middle class, as costs such as education and living expenses have surged while salaries fail to keep pace.

CEO-to-Fresher Pay Ratio Highlights Inequity

The stark contrast in pay is further underscored by the CEO-to-fresher salary ratio. According to Moneycontrol’s research:

• Wipro leads with a ratio of 1,702:1.
• Tech Mahindra follows at 1,383:1.
• HCLTech, Infosys, and TCS record ratios of 707:1, 677:1, and 192:1, respectively.

The imbalance reflects broader trends in wage stagnation across industries. A report by FICCI and Quess cited in the Indian Express revealed that the compounded annual growth rate (CAGR) for wages in the engineering, manufacturing, process, and infrastructure (EMPI) sector between 2019 and 2023 was just 0.8%.

Why Freshers See Lower Pay

Experts attribute the stagnant fresher salaries to the industry’s pyramid model, which prioritizes a large pool of entry-level employees. Gaurav Parab, Principal Research Analyst at NelsonHall, noted that the high availability of fresh talent suppresses wages, as companies must invest significantly in training entry-level employees.

“CEO salaries align with global CXO benchmarks as enterprises aim to remain competitive in a global market,” Parab explained.

The high attrition rates and poor quality of higher education also add to the challenge, according to Kamal Karanth, Co-founder of Xpheno. “The industry’s cost advantage relies on controlling fresher salaries, but it has offered accelerated career paths to manage discontent,” Karanth said.

Inflation, Inequality, and the Middle Class

The stagnation in fresher salaries is exacerbated by inflation and rising interest rates. Pai pointed out that middle-class discretionary spending has declined due to rising costs of living. “Freshers’ salaries should rise to at least ₹5 lakh annually,” he argued, adding that IT companies are profitable enough to make these adjustments.

Wage hikes in the IT sector during 2021 and 2022, spurred by increased demand for tech talent, were short-lived. By 2023, global economic uncertainties slowed salary growth once again.

The Bigger Picture

The disproportionate growth in CEO salaries and the stagnation of fresher wages is not unique to India’s IT sector. Across industries, wage inequality has become a growing topic of debate. While some argue this reflects global market realities, others call for a more balanced distribution of profits.

As India’s IT sector grapples with these challenges, the future will depend on whether companies can address structural inequalities while sustaining profitability.

This article is for information purposes only and does not intend to defame any company or sector and is based on an originally published report by Moneycontrol. The original article can be accessed at Moneycontrol.