New Delhi: Salaries of engineers in information technology (IT) services companies have soared by as much as 40%, fuelled by rising global demand for solutions in cloud computing, data analytics and digital technologies in what experts believe could spell the start of an Indian summer for the IT sector.

The trend of higher wage increases for this group of engineers, who constitutes 40-45% of the workforce at the largest IT outsourcing companies, will likely continue as most firms see faster growth in the share of their digital business, say headhunters.

“Much of the attrition is because of people with 2-7 years of experience leaving," said the head of human resources (HR) at a Bengaluru-based company. “Why are most of them leaving? More demand for digital work means that companies need full-stack engineers or people who have reskilled themselves. It is a difficult task for us (HR heads) to retain this talent pool as these people are being chased by all companies."

The executive did not want to be named as the firm is in a quiet period before declaring its second-quarter earnings.

“It is surely the best of times and this trend will only continue (of engineers finding better jobs) as demand for digital increases," said the executive.

“We have seen up to 35-40% increases in salaries when these people, with up to seven years of experience, have changed jobs," said Kris Lakshmikanth, founder of Bengaluru-based Head Hunters India, a staffing firm with a pan-India presence. “But the attrition rate also includes a large number of employees being let go."

A higher churn among this group explains the rise in attrition at these companies. All IT companies, except Tata Consultancy Services Ltd (TCS), reported higher attrition rates of 17-22% during the April-June quarter. Attrition was the lowest at TCS at 10.9%. However, Infosys Ltd’s attrition was 23%, while Cognizant and Wipro’s attrition rates were 22.6% and 17.7%, respectively, at the end of the June quarter. Accenture Plc, which follows a September-August fiscal year, reported 18% attrition in the June-August period.

“Are we concerned with the 18%? Not at all," Accenture chief executive Pierre Nanterme told analysts in a post-earnings call on 27 September. “Let’s be clear...we believe it’s a realistic level of attrition, given the level of competition for talent in the marketplace. We have today zero issues to hire the talent we need, and it’s true everywhere across the world."

For home-grown IT firms, digital accounts for 25% of the total business, far less than at Accenture, which claims newer and digital business constitutes 60% of its overall revenue.

Indian IT firms that pay higher salaries to engineers working in newer technologies, or digital technologies, are looking to offset the increase in the wage bill by hiring more graduates from second or third-rung engineering colleges, according to a survey by a Mumbai-based brokerage.

IT firms are increasing intake from non-top 100 colleges (56% in 2018 versus 45% in 2016) to keep their average input costs stable," Pankaj Kapoor, director of India IT services and software equity research at JM Financial Institutional Securities Ltd, wrote in a 3 October note.

Again, the gap between the salaries offered by IT firms and other companies to engineering graduates has widened over the last two years.

According to JM Financial, which surveyed 44 engineering colleges accounting for about 10% of campus recruitment by IT firms, this has led to 14% of students with computer science degrees preferring non-IT firms in 2018 against only 8% in 2016.

“Average salaries offered by mass hiring IT firms have been static around ₹ 330,000 per annum (p.a.) over the last two years. This implies a 3% CAGR over the last 10 years," Kapoor of JM Financial wrote in a note. “Comparatively, the average salary of non-IT firms was ₹ 506,000 p.a. in 2018, an increase of 10% over the last two years and 8% CAGR since 2007."

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