Why The Annual CTCs Of Freshers From Engineering Colleges Are Stagnant Between INR 3 to INR 4.5 LPA?

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Why The Annual CTCs Of Freshers From Engineering Colleges Are Stagnant Between INR 3 to INR 4.5 LPA?

Even though there is a steady demand for engineering freshers in the IT industry, the notion of what is a ‘fair’ starting salary can be quite relative. It depends on when the candidate is joining the company, the level of industry exposure, and the skillset. However, the trends indicate that in spite of large-scale hiring in IT companies, there has only been marginal changes in freshers’ starting salaries.

To put things into perspective, the last significant increase in IT freshers’ starting salary took place back in 2018, according to a report published by The Economic Times. Since then, it has remained stagnant even though the IT sector hires a large number of freshers every year.

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In 2022, IT companies will surpass all the previously set hiring records with plans to induct over 3,60,000 freshers by the end of the financial year. Usually, when there is an increase in the hiring numbers, it can lead to an uptick in the employee’s salaries as well.

But it is clearly not the case for IT companies as they have kept the starting salary between INR 3.3 to 4.5 LPA since 2018. Although it seems apparently unfair, many believe that it is normal.

Want to know why? Let’s find out.

Colleges Don’t Teach Skills

Most engineering colleges don’t teach students any industry-relevant skills and they usually join IT companies as trainees. It is a shortcoming of engineering education in India and companies are well aware of it. As a result, the hiring process mostly tests the aptitude and adaptability of the students. The selected candidates then go through an exhaustive training period at the company offices, after which they become ready to work.

Or in other words, even before a fresher can start working, the company has to make a significant investment in skill development. According to experts, this is the main reason why freshers' salaries have stayed so low over the last 3-4 years. Besides, this model is still acceptable to freshers because the skilling process eventually helps them to advance in their careers. The only way around this problem is to upskill via online courses.

Clients Don’t Pay To Train Workers

The Economic Times pointed out in a report that the cost of skilling the candidate falls squarely on the company itself. The clients work with a tight budget and charging them extra for skilling candidates would stretch them to a point where projects become untenable. Therefore, keeping the freshers’ salaries low is a way of balancing the costs for the company, while training them with relevant skills so that they can get the day-to-day work done.

In order to understand the situation in detail, The Economic Times spoke to Peter Bendor-Samuel, the CEO of IT consultancy firm Everest Research. Mr. Bendor-Samuel echoed similar concerns, saying, “Clients are reluctant to pay to train workers and there is intense pressure to keep pricing, and therefore wages, lower for freshers.” He also pointed out that this is the reason why fresher salaries rise much more slowly than those with industry experience.

More Demand Than Supply

In 2021, a poll was conducted by Moneycontrol to see if freshers in the IT industry feel that they are underpaid. Out of the 144 responses received, 81 replied in affirmative. As many experienced veterans in the industry have pointed out, salaries depend on the overall demand and supply measures, and in India, the supply of engineering freshers is always higher than the demand in companies.

The fact that IT companies would hire 3.6 lakh freshers in FY22 means that nearly 6 lakh freshers will be left in the market without any job. Around 10 to 15 lakhs students graduate every year with engineering degrees and everyone knows that all of them are not employable. People who don’t make it to one of the tech companies have to find other means of employment, while freshers who make it feel privileged even if the salary is not satisfactory.

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Upskilling Always Helps

Tech jobs usually require a highly specific skillset and candidates should fit the profile like pieces in a puzzle. For instance, nginx, react.js, node.js, python django, and spring boot are some of the most commonly required skills for IT freshers. But colleges don’t teach them in their courses, which puts the burden on the shoulders of the company. However, on the flip side, if freshers come with these skills at the time of joining, they get better packages.

Tech freshers can start with INR 4.5 LPA if they have additional certifications that demonstrate their proficiency in a particular technology. Or for instance, if they have full-stack digital skills, they can start on salaries as high as INR 7 LPA. Therefore, if freshers can upskill themselves on their own via online courses on ed-tech platforms, their chances of getting a better package increase significantly. But these courses are expensive and everyone can't afford them.

Conclusion

Clearly, the reasons behind fresher’s salaries not rising over many years are multifold. On one hand, hiring freshers means that companies will have to invest a significant amount in skilling the candidate which will increase the overall CTC of the candidate. Secondly, there is a much larger pool of fresh engineering graduates than the IT company’s capacity to absorb. However, salaries do increase with improved experience levels and those who manage to get into top companies have solid reasons to feel privileged.

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