Behind the Growing (and Huge) IT CEO-Fresher Pay Gap
It was in 2012 when Asmita started her career at Infosys for an annual compensation of Rs 2.75 lakh. At that time, the Infosys CEO was paid Rs 80 lakh per annum. Ten years down the line, her brother joined the same company at Rs 3.6 lacs pa, but now the CEO was taking home (hold your breath) a whopping Rs 80 crore! There’s an obvious disparity here. World over, the salary difference between IT freshers and CEOs is gigantic, and the gap only keeps widening every year. In the last decade alone, the median salary of tech CEOs saw an 835% jump, while the salary of freshers in tech languished at a mere 45% hike mark. While the median salary of freshers has increased to Rs 3.55 lakh from Rs 2.45 lakh over the last decade, inflation recorded a rise of 78% during the same period. This means that for every Rs 1,000 earned in 2012, a person must earn Rs 1,780 rupees in 2021, just to be able to match the salary. But since the salary of an IT fresher is said to have increased only 45%, freshers today are, effectively, earning lesser than the freshers 10 years ago. In an interaction with Moneycontrol, T.V. Mohandas Pai, former chief financial officer at Infosys said, “Just look at the inflation figures and you will see that the value of money would have fallen by half in the past 10 years. This means that pay of even Rs 4 lakh today is the same as Rs 2 lakh a decade back.” At the other end of the spectrum are tech CEOs getting sizable salary hikes every year. So much so that hiring new CEOs has become an expensive order for tech companies. In FY2022 alone, CEOs were awarded salary hikes of around 25-45%, according to the data shared by Primeinfobase. If we refer to the recent annual report shared by Infosys, in FY2022, Infosys CEO Salil Parekh saw a salary increase of 43%. TCS CEO, Rajesh Gopinathan got a 23% hike and Hindustan Uniliver MD received a salary jump of 43%. (For every rupee a tech fresher earns, CEOs get more than ₹2000) Why are fresher’s salaries so low? Of course, the CEOs have earned it, but are the freshers getting a raw deal? There is the law of supply and demand at work here. India produces more than 15 lakh engineers every year, but the industry requires less than 1/4th of them. Since the company has a large talent pool to choose from, it gets easier for them to hire for less and then decide the paycheck based on the recruits’ performance in the organisation. Rituparna Chakraborty, co-founder, and vice-president of TeamLease Services told MoneyControl, “When the supply of engineering freshers is four times the requirement, why would the companies pay higher? Moreover, while the technology services that the IT industry provides have become more sophisticated, the level of skills that most freshers bring to the table has remained the same.” That’s right. Another reason that might back the low salaries of freshers is that they usually don’t bring the required, updated skill sets to work in the industry. So, the first few months are spent training them, the cost of which is borne by the hiring company. “After the first year, an engineer typically gets a pay hike of 15-20%. Those who perform well thereon can expect their pay to go up by 50% in two years,” an industry expert pointed out. Why CEOs get enviable salaries At the first glance, it may seem that the sky-high paychecks of CEOs are fueling the huge inequality in society. But then, the salaries of CEOs are also a reflection of how well the company is performing. According to many industry experts, what most CEOs get as a salary is little compared to the perks they are entitled to. Most of them have about 85% of their paychecks as stock options, so the growth depends on the company’s performance. In an interaction with Deccan Herald, Shriram Subramanian, founder & MD of InGovern Research Services said, “One has to differentiate between promoter compensation and non-promoter compensation. In some cases, more than 80% of their compensation is linked to performance. If the fixed salary component gets a disproportionate raise, then it is a matter (of concern).” CEOs are essentially the captain of the ship and have skill sets acquired through years of experience. Take Elon Musk, for example; he handles companies like Tesla, SpaceX, and The Boring Company. One wrong decision or a controversial tweet is enough to send Tesla’s stocks spiralling; which freshers never have to worry about. With huge power comes great responsibility (and a great pay package). People in managerial positions routinely handle the stress that comes with the position. According to a study, after an industry-related shock, CEOs experience a 1.2-year decrease in life expectancy. Again, the supply-demand curve we discussed earlier, applies here too. “It’s quite clear that there are a limited number of people that have the skills, the personality and disposition to be the CEO of a top company, and those limited number of people are highly sought after,” says  Daniel Pryor, head of programmes at the Adam Smith Institute.
The salaries of top tech CEOs around the world have increased by more than 800% in the last decade, while freshers’ salaries rose by a paltry 45%. Does this make you question the status quo?
The salaries of top tech CEOs around the world have increased by more than 800% in the last decade, while freshers’ salaries rose by a paltry 45%. Does this make you question the status quo? 
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Tech-savvy storyteller with a knack for uncovering AI's hidden gems and dodging its potential pitfalls. 'Navigating the world of tech', one story at a time.
You can reach me at: lokesh.choudhary@analyticsindiamag.com.