By Mohan Krishnamoorthy
The other day I was talking to an Indian-origin friend from Australia who said he had a jaw-dropping moment when he heard about the salary his former colleague in India was making. His question was rather straightforward “Mohan, is it really true that a Director of Engineering at ABC, a *FAANG tech really makes $ XXX – a six-figure $ salary as he claims?”
A question like this shouldn’t have surprised me. The topic of IT salaries in India are cloaked in an aura of mystery and is the stuff of urban myth. Although managers discourage employees from discussing salaries with colleagues, it is all too common to overhear watercooler chats and animated discussions on online forums.
Ask any Indian techie on how satisfied s/he is with his salary, and you can see a rolling of eyes and shrugging of shoulders. Ask the same question to an HR Partner and you can see them roll their eyes too – but not for the same reason. The disconnect is the ‘cost’ to the company (CTC) versus the expectations driven by urban myth.
After earning in Euros, Pounds and Dollars for much of my working life, I was reintroduced to the fuzzy math around CTC and they dynamics of earning in Rupees a few years ago when I moved back to India. It took a while to decipher local salary structures though I continue to be intrigued even after switching to the other side, as a hiring manager working with my corporate recruiters.
Salary as a cost to the company
As a leader of a group or business unit, one has a budget to work with, and can hire and manage “resources,” who are benchmarked against a CTC lens. For the past couple of decades, offshoring IT services was all about cost arbitrage – the ability to hire lower cost skills in India while sourcing work to organizations across the globe. Cost differential between the west and India continues to be the backbone of the business model adopted by Indian IT Enabled Services (ITES) firms.
While talking to prospective hires, IT Recruiters routinely refer to a homegrown benchmark – ₹ 200-250K for every years’ experience. Don’t ask me about the efficacy of this yardstick. By this yardstick, the techie with about 10 years in the industry may expect around ₹ 2.5 million. The fuzziness begins when we look at the CTC on offer – the breakup will include cash and non-cash benefits with a large percentage as a ‘variable’ pay that rises as you go up the ladder.
At current exchange rates, 2.5 million in rupees is about US$ 35,000 – less than an entry level salary for an IT grad in the US – which goes to show how offshoring cost arbitrage is alive and well!
Salary expectations versus calculators
In the past years, many multinationals began establishing their own captive-IT centers in India. The cost arbitrage between their high-cost centers in London, Frankfurt or Boston and India is still the driver in establishing captive centers. Due to a lack of an efficient benchmark, hiring managers at Captive Centers refer to the organic CTC model adopted by ITES recruiters with a few tweaks here and there.
This model was upended by the advent of technology companies like Microsoft, Facebook, Amazon, Apple, Netflix and Alphabet/Google – collectively known by the acronym *FAANG – that began to establish development and R&D Centers in India and China. These R&D centers are budgeted and managed globally. And unlike IT Service firms that have aggressive targets of hiring tens of thousands of engineers a year, FAANGs are extremely selective in hiring. They scout for entry-level programmers and analysts from top universities in the country and try to sweeten the pot for the cream of the crop by offering RSUs and ESOPs which sets show an inflated benchmark to the rest of their cohorts. Similarly, key engineers with patents and IP who drive lucrative product lines or solutions may be offered eye-popping salary offers.
This is similar to the model adopted in Silicon Valley too, perhaps the reason why Glassdoor shows a huge variance of Software Engineer salaries ranging from low $ 70 Ks to $180K annually. Those smart and lucky enough to get into a FAANG draw the top dollars, while the rest slog along at startups on pizzas and ‘minimum’ tech-wage with promises of stock riches that may or may not come to fruition.
Reality check on the Urban Myth
The urban myth has many whispering about “Top Dollar” salaries in India which prompts mid-career immigrants like my Aussie friend to wonder about the marketplace. Such urban myth also fuels periodic click-bait fake news articles – just google the HuffPost story “The Story Behind A 16-Year-Old Chandigarh Boy’s ₹1.44 Crore ‘Job Offer’ From Google.”
The fact remains: there is a dichotomy in salary structures that arise due to budgeting for CTCs that swings wildly between ITES, captive centers of multinationals and R&D centers.
When it comes to packages for key roles like the head of delivery units or sales executives who are global rainmakers, all bets are off. The CTC for these roles have always been on par with global wage equivalent in dollars.
The company that pays $250K to head of a business unit in Boston is likely to offer a similar package to an expat or local executive in that role, especially if the person commutes and manages a global team across geographies. The same goes for head of sales driving multi-million-dollar client accounts. The ‘Director of Engineering’ at a FAANG drawing $250 K in bay area, probably gets her salary in Indian rupees commensurate with the local market. But that salary, when supplemented by RSUs and ESOPs takes the CTC to a global parity.
–Mohan Krishnamoorthy is an Indian American technology executive with a multinational company. The opinions in this article are his own and not that of his organization. To those wondering about his CTC, he was honored with a Silver certificate by the Income Tax Department for his tax contributions to the Indian economy. He can be reached at mohan@garamchai.com or https://www.linkedin.com/in/mohanbabuk/