Explained: Why IT CEOs are making big bucks but freshers struggle to go beyond Rs 4.5 lakh a year

Infosys chief executive officer (CEO) Salil Parikh is proposed to take home a paycheck of nearly Rs 80 crore this fiscal while a fresher at the IT behemoth will draw an annual salary of Rs 3.6 lakh. A decade ago, the company's then CEO S.D. Shibulal was being paid Rs 80 lakh while newbies were making Rs 2.75 lakh per annum.

Even as attrition rates are high across the IT sector and techies are able to negotiate for high pay packages, data shows salaries of IT firms’ CEOs have gone up five to even 10 times in some cases, while fresher remunerations are stagnant or probably even lower, if adjusted for inflation.

The current salary scenario is amid a consistently strong supply of freshers while IT companies’ managements’ have moved from being promoter-driven to professionally-driven.

In the example cited above, Infosys’ Salil Parekh drew a salary of Rs 71.02 crore in the 2021-2022 financial year. This sum includes a total fixed salary of Rs 6.07 crore, bonus or incentive pay of Rs 12.62 crore and exercise of employee stock ownership plans (ESOPs) earlier granted at Rs 52.33 crore.

1. Salary components: CEO salaries are linked to ESOPs and profitability, the more the profitability, the better the chances of the top brass taking home a higher pay. Freshers, meanwhile, do not usually have ESOPs linked to their pay packages.

Salil Parekh, whose salary has been most talked about, got 70 percent of the remuneration last year via the exercise of the ESOPs granted to him earlier. Infosys cited industry-leading growth in recent years for the fat paycheck.

2. Company growth: Tech firms have grown 3-4X in the last 10 years in terms of size and employee strength and now it’s the responsibility of CEOs to steer the companies in the current multi-year tech upcycle.

“IT industry provides have become more sophisticated, the level of skills that most freshers bring to the table has remained the same,” Rituparna Chakraborty, co-founder and vice-president of TeamLease Services, explained.

4. Demand-supply gap: There is only one CEO, and if one performs their duties well, they get paid well. IT CEOs are being poached from global firms like Wipro’s Thierry Delaporte, the first global CEO of an Indian company, or Infosys CEOs in the past like Vishal Sikka and now Salil Parekh were from global IT giants. Hence, the salary needs to be comparable.

The supply of freshers i.e. engineers, on the other hand, has remained robust over many years and reports suggest the supply is four times that of demand.

5. Exceptions: The salary of a fresher cited above is a median but if one is willing to get skilled and shows the appetite, their salary can be double the median salary, Tata Consultancy Services said. Also, in the past two years, as attrition has been on the rise, IT firms have given big bonuses, salary hikes, and promotions to all “deserving employees”, it added.