Have heard a lot of noise around IT sector margins suffering due to attrition.
Wanted to share some data and personal experience. Note that this only applies to the multinational companies. Don't apply it to all Indian IT companies.
Wanted to share some data and personal experience. Note that this only applies to the multinational companies. Don't apply it to all Indian IT companies.
Hiring people who are outside of the usual pay bands is very frequent for these multinational cos. The way companies handle this is to structure pay in a way that first year salary is higher than the current salary of employee.
The salaries then fall off, unless employee performs very well (in which case they deserve the hike).
These cos achieve this by the way of providing more equity (options, esops etc) in 1st year with subsequent years equity tapering off.
Eg: structuring it like 40% in 1st year, 40% in second, 10% in third, 10% in fourth instead o
25% each year that they generally do.
Eg: structuring it like 40% in 1st year, 40% in second, 10% in third, 10% in fourth instead o
25% each year that they generally do.
This definitely front ends the costs and slightly impacts earnings due to tine value of money but the impact is miniscule imo. Earnings might appear optically lower in year 1 or 2, but earning power does not go down.
Conclusion: I don't expect earning power of IT COs to go down. There might be some short term pain due to lot of churn due to covid disruptions, bur eventually things will come back to normal in 2-3 years imo.
Lot of noise imo. Terminal value hardly changes.
Lot of noise imo. Terminal value hardly changes.
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