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Finding talent in India can be incredibly difficult. While there are a number of under- and un- employed high school and college graduates in India, generally these individuals are not trained with the skills needed by multinational employers.

In addition, some Indian candidates with strong skills may not fit the needs of multinational employers because of the historical variations in work practices from those found in the West. In other words, while at some levels and in some industries there are many candidates with the technical skills to fill a position, they may not have the cultural skills to fit in with an organization.

Finally, there is a shortage of talent at the upper end of the employment scale, particularly in IT. There simply arent enough candidates with the necessary experience to fill top roles. Turnover levels have gone up in many industries, including IT and IT enabled sectors and to a lesser extent in advertising, marketing, and retailing. Though still below the rate of comparable industry segments in the West, turnover can be a problem, as economic growth, increased salaries, and a shortage of skilled employees at the top of the scale can tempt the best and the brightest to change jobs often.

As a result of this shortage, and to combat turnover rates, salaries have risen dramatically in high demand sectors, especially at the upper ends of the scale. In addition, salaries in India account for less than half the value of a typical compensation package. Benefits like rent-free or concessional housing, free use of motor vehicles and/or drivers, interest subsidies on loans, and the like may all be part of a total compensation package.

Compensation

Although pay in India is considerably lower than in Western countries (and even some developing nations), shortages of skilled workers (especially in IT) have led to dramatic pay inflation. Salaries in some sectors of the economy climbed at a staggering 40 percent annually during the mid-1990s. Since then, the Asian financial crisis and the IT slowdown have caused the economy to cool off, with the job market following suit. Consequently, pay increases have slowed markedly over the past few years, although average salary increases continue to significantly outpace the inflation rate of 6-7%.

The best entry-level employees with a high-tech degree from one of Indias well-renowned Indian Institute of Technology campuses can expect an annual salary of around US$14-16,000. While this sum is substantially more than it was five years ago, it seems startlingly inexpensive when compared to the offers that some of these same graduates receive from companies overseas. Entry-level employees from second-tier schools receive lower levels of compensation.

Less skilled employees and those in other industries, such as the medical transcriptionists employed by multi-nationals who have discovered the cost-advantages of remote processing in the sub-continent, receive about $1,200 per year (this level is fast increasing), while the same job in the US would command more than twenty times as much pay (about $25,000).

Depending on the industry and job function, employees higher up the corporate ladder in middle management can expect to receive an annual salary range up to about $US30,000. Senior level employees can expect base salaries ranging from about $35,000 to $85,000 depending on the function and the industry of the employee.

Benefits

The basic salary of an employee in India usually accounts for between 40 and 50 percent of the total package, meaning benefits or allowances are an important part of compensation in India. This is partly because there have traditionally been tax advantages to receiving payment in kind. Proposed changes in Indias tax rules will eliminate many of these tax advantages, which will present a significant compensation challenge for HR professionals in India. However, at this time, benefits still account for a significant part of any employment package, and thus continue to play vital role in luring and retaining key employees. In addition, certain perquisites like housing, cars, and loans (companies often offer their employees very low interest short and long term loans) will continue to be taxed at concessional rates, even after the new tax rules are enacted, and thus will remain in demand by employees.

Among the most significant benefits is housing. Employers often reimburse a portion of the rental costs of the employee in the form of house rent allowance (HRA), a portion of which is not subject to income tax.

Another important benefit is the medical allowance. Medical allowances may come in a variety of forms. Companies may reimburse expenditures incurred by the employee for his own or his familys medical treatment, pay a fixed allowance for routine check-ups, or undertake a group medical insurance policy.

Pay packets may also include a dearness allowance, or as it is known in the US, a cost of living adjustment. Other examples of allowances include work clothing allowances, professional education allowances, commuting allowances, holiday allowances, and the like.
For expatriates, allowances may include the entire familys airfare on home leave, and the fares of children studying abroad and visiting their parents in India. Because of poor road conditions and slow traffic, a car with a driver is generally necessary for expatriates who are unaccustomed to such driving conditions. Drivers and cars are necessary for senior level Indian managers as well.

Other benefits that might help to attract or retain professionals include gymnasium facilities, child-care facilities, periodical subscriptions, club memberships, insurance and loan facilities.

Retention

Once a firm manages to find and hire a top employee, retention becomes the key issue. This is most important in the IT industry, where the majority of Indias job hoppers are employed. The famed International Technology Park in Bangalore, which boasts self-contained power facilities, modern gymnasiums, food courts and other amenities, is indicative of what it takes to retain IT professionals. In a country where thousands of villages are without electricity or telephones, Indias technology parks stand out as bastions of unexpected affluence.

The most favored employers will make a significant investment in training their employees. Although some might contend that training simply makes the employees more saleable, it is equally likely to breed employee loyalty. This is especially true in the IT sector, where skills quickly become dated and employees need constant retraining in order to remain current. Indeed, a Business Today / Hewitt Associates study rated Infosys, a company that puts all of its junior employees through a three-month training program, the most favored employer in India. All good companies provide other facets of employee development, including skills upgrade training and personal development programs on a regular, on-going basis.

In addition, maintaining job satisfaction through variation of duties is important to ensure that employees dont simply leave out of boredom. New Delhi-based Hughes software, for example, has initiated an internal placement program that helps employees to move between departments and projects within the company. Although this has caused some logistical problems, as some projects lose valued personnel, the cost to the company may well be lower than losing the employee to a competitor.

Conclusion

For multinational corporations looking to remain cost-competitive, India represents a significant opportunity. Indians not only work for much smaller sums of money than do other nationals, they often match or exceed other places in terms of quality. Nevertheless, the costs of doing business in India are rising, as the supply demand imbalance, particularly in IT, breeds higher salaries and decreased employee loyalty. However, with slowing growth in the IT sector, wage inflation seems to be under control. For foreign companies who understand the local labor market and compensation and retention issues, India will remain an attractive market for foreign investment and expansion.

Ames Gross is President of Pacific Bridge, Inc. (PBI), a recruiting and HR consulting firm specializing in Asia. Sign up on their website, www.pacificbridge.com, for their FREE Asian HR eNewsletter, a regular email publication of current issues and trends in Asian HR.

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