 Evaluation of compensation practices of the IT industry

 First of all we will understand what is compensation practices?

 Compensation is the process of providing adequate, equitable and fair remuneration

to the employees. It is what employees receive in exchange for their contribution to
the organization. It is a comprehensive term which includes pay, incentives and
benefits offered to the employees.

 PURPOSE OF COMPENSATION
 Contribution based Remuneration
 Attract talent
 Motivate & Retain Staff
 Ensure Equity
 Administratively Efficient
 Reward Valued Behaviour

 Now let’s understand compensation practices of IT industry

 The IT (Information Technology) sector comprising of software and hardware

sectors is a sunrise sector in many countries. Despite the fact that the sector has
been around since the late 1980’s, the sector is considered relatively young and a
place for innovation, entrepreneurship and growth. No wonder many fresh
graduates flock to the IT sector after graduation to take up roles that are
challenging and stimulating.
 To attract the best talent available, the IT sector designs the compensation
packages in ways that can be termed innovative and path breaking as they
bundle the basic compensation components and perks and benefits in novel and
unique ways.
 This article looks at some of the ways in which the IT sector provides
compensation for its employees.
 Innovative Compensation Packages

 A hallmark of the compensation packages in the IT sector is their reliance

on non standard components that are the characteristic of the old
economy or the traditional sectors. In comparison, the so-called “new
economy” companies make it a point to include additional components like
variable pay, performance linked incentives over and above the base pay that
they give out to their employees. With the aura surrounding the IT sector, many
employees have come to take for granted the high pay along with the attractive
perks and benefits that these companies give.
 ESOP’s

 The IT sector pioneered the introduction of ESOP’s or Employee Stock

Options plans for the employees as a means of ensuring that employees take
 more ownership and responsibility for their work by making them partners in the
growth of the company. The rationale for giving stock options to employees is
that once they feel a sense of ownership with the company in which they are
working, their performance levels go up due to increased motivation and
satisfaction that such a practice tends to inculcate in the employees. Given the
fact that most IT stocks zoom ahead in value after the IPO or the Initial Public
Offering is announced and retains their valuations well into the company’s
existence, IT companies that offer ESOP’s are much sought after by many
employees.
 Other Perks and Benefits

 The IT sector provides additional benefits like transportation, medical allowance

and allowances for furnishing one’s house. With an emphasis on all round
welfare as opposed to paying the employees what is the minimum, IT companies
ensure that their employees are taken care of well. Many companies in the IT
sector are quite liberal in insuring their employees and their families under group
medical insurance which provides adequate cover to the employees and their
families in case of illness and surgeries as well as accidents and other
unanticipated contingencies. Further, some IT companies go a step further and
provide for recreational allowances that ensure their employees’ vacation
expenses are also taken care of.
 Given the innovative ways in which IT companies provide for their employees, it
is not surprising that this sector ranks among the most preferred employers and
the companies that make up this sector is the destination of choice for many a
grad fresh out of college.