Freshers Get A 4% Pay Rise In 5 Years While CEOs Enjoy 160% Hikes. Why Are Freshers Left Behind In An Industry Built On Their Work?

A grim revelation awaits the Indian IT sector, long heralded as a beacon of growth and innovation: an alarming gap between the skyrocketing salaries of its CEOs and the stagnation of freshers’ pay. Over the last five years, the CEOs of India’s top IT firms have seen their compensation packages go up by an unbelievable 160%, while the same period has only brought a laggardly 4% increase in freshers’ starting salaries. 

A gross imbalance that raises very stark questions about fairness, governance, and the more general ethical dimensions of compensation practices within one of the world’s most rapidly growing economies.

The Numbers: Tale of Two Extremes

CEO Pay Growth

Compensation packages of the top executives in India’s IT industry have grown at astronomical rates over the past five years. In FY24, the median annual pay of CEOs at the top five IT companies soared to nearly ₹84 crore, or 160% more than those five years ago. 

Tech Mahindra stands out among the industry leaders, paying its CEO an astonishing ₹791.7 crores in FY24, as compensation for the top executive of a company as a yardstick for executive remuneration. Notable are these ratios of CEO to fresher salaries

• Wipro: 1,702:1
• Tech Mahindra: 1,383:1
• HCL Technologies: 707:1
• Infosys: 677:1
• TCS: 192:1

Freshers’ Pay Continues to Turn Stagnant; Equity Crisis Deepens in Indian IT

The Indian IT sector, a long-standing pillar of economic growth and upward mobility, is now facing an undisputable problem: static fresher salaries. The pay increase for entry-level employees who run shows at the top IT companies is almost exponential for top CEOs of these firms; however, the situation remained relatively unchanged even in the past five years. This pattern raises disturbing questions about fairness and equity in the sector for its long-term sustainability.

Freshers’ Salaries: An Era of Stagnation

The starting salary for freshers in India’s IT sector has risen only from ₹3.6 lakh annually in FY 19 to just ₹4 lakh in FY 24, registering an increase of just a measly 4% in five years. At that rate, the increase has been a CAGR of just 0.8%, which is rather paltry compared to India’s average inflation rate of around 5–6% for the same period.

This stagnation contrasts with the profitability of the sector, which has been growing year on year. For instance:

• The Indian IT industry reached revenues of $245 billion in FY23, up 9.4% from the previous year.
• Export revenues have grown steadily, making India a global hub for IT services.

While this is good news, the fruits of growth have accrued disproportionately to top management. While the salary for freshers has hardly increased, cost items such as housing, transport, and healthcare have increased sharply, thereby eroding the purchasing power of the entry-level employee. For a young professional looking to build a career in urban India, this gap means financial stress and limited upward mobility.

Historical Context: A Decade of Widening Disparities

This gap in the pay difference between the executives and the freshers has been increasing for more than a decade. In early 2010, IT firm freshers were making an average of ₹3.25 lakh per annum, which is now at ₹3.75-4 lakh in 2024. In the same period, CEO compensation went up drastically. 

In FY11, the average CEO of a top Indian IT firm earned ₹10–15 crore annually. This had increased by FY24 to over ₹80 crore, a figure that was 835% higher.

This is beyond individual performance but indicates a structural shift in the compensation practices of the corporate entity. Global benchmarking on the aspect of executive pay, among other factors of increased pressures from shareholders, has given way to rewards for the top management, leaving minimal increments for entry-level workers.

Major Contributing Factors to the Gap

Too Many Engineering Graduates

India produces about 1.5 million engineering graduates every year, much higher than the IT industry demand. In FY22, the industry hired around 360,000 freshers, meaning a large chunk of students remained unemployed or underemployed. 

This oversupply situation makes it a buyer’s market, where the companies can afford to pay the lowest salary knowing that hundreds of thousands of students are in a queue for a limited number of positions.

Lack of Bargaining Power

The lack of collective bargaining and labor unions in the IT industry means freshers do not have any negotiating power. Fresh graduates, being desperate to get their first job, accept whatever the company offers, even though it may not be equal to inflation-adjusted living costs. The employers exploit this weakness to keep the entry-level wages low.

Global Benchmarking for CEO Pay

Indian IT firms would often bring their executive compensations at par with other global standards to attract good talent and retain the better ones. This has culminated in CEOs drawing excessive salaries even when the firms’ performance does not demand such increases. For example:

The CEO of Tech Mahindra raked in a staggering ₹791.7 crore in FY24, as comparable to some of the best-paid executives in the world.

Cost-Containment Strategies

IT firms defend meager fresher pay for the reason that these guys have to invest much more on skill building and upgradation training. Industry estimates state, on average, it will spend ₹1- ₹2 lakh on each freshers’ up-skilling during the first year with the company. Although true to some extent, it never explained the long hiatus of decade over a decade on low fresher pay.

Play on Profit Margins

A lot of companies have resorted to keeping fresher salaries low in a bid to sustain high profit margins amid competition around the world. For instance,

In FY23, Infosys reported an operating margin of 21% whereas TCS maintained its margin at 24%. It is an indication of excellent profitability partly achieved by curbing wage growth at entry-level.

The CEO-Fresher Pay Gap

The most graphic evidence of this is in the ratio of pay of a CEO and fresher. The industry focuses rewards on a high-level salary for those who toil below and freshers have less than the bare minimum as remuneration.

Economic and Social Impact of Pay Gap in Indian IT Industry

The rising wage gap in India’s IT sector between executives and freshers is more than a matter of numbers-it has significant consequences for employees, the economy, and society as well. This inequality is not only a morale destroyer but also a multiplier of already existing economic and social challenges.

The pay gap between executives and entry-level employees is a very wide gap within organizations. Freshers are often charged with the majority of the day-to-day operations but feel undervalued since they are critical to the delivery of the company’s services. 

Their efforts are drowned out by the ballooning rewards handed to the top executives. This is what creates frustration, resentment, and disengagement.

It is a very disheartening feeling for many freshers when they realize that their hard work does not translate into fair compensation. It lowers their motivation to excel and thus decreases productivity. 

When they see the executives getting rewards of an unprecedented scale, the disparity clearly tells them that the system values decision-making at the top much more than the tireless efforts of those at the bottom. This slowly eats away at the organizational culture, as employees feel like replaceable cogs rather than respected contributors.

Widening income inequality

India already suffers from acute income inequality, and the IT industry’s pay practices are adding fuel to the fire. The level of concentration of wealth at the top creates a much wider economic divide between the highest echelons and entry-level employees whose wages seem to stagnate. According to the World Inequality Report, in India, the top 10% of the earners receive 57% of the national income, whereas the bottom 50% receive only 13%.

This inequality transcends even outside the workplace. It leaves an impression of a society concentrated in the hands of only a few and creates inequalities in opportunities and resources. 

With the IT sector always heralded as the next sector of upward mobility, systemic inequality is being cultivated to contribute to it instead of mitigating it. Economic stability becomes difficult with socially weak cohesion and unrest that emerges through such concentration of wealth.

Impact on Consumer Spending

Freshers whose salary growth is at a standstill are badly squeezed on their finances. The disposable income is too low, thus spending on discretionary items like travel, dining, and leisure remains out of the league for them, as they happen to be some of the biggest consumer spends. 

Thus, it trickles down in a consumption-based economy like India’s. Industries which rely on consumer spending like retail, real estate, and hospitality take a hit.

As one of the biggest employment-generating sectors, IT directly impacts the nation’s consumption pattern. Continued financial stress at the entry level is likely to be felt more severely at the macro-economic level. 

Urban markets are very much dependent on youth employment and will see their growth come down, with adverse impacts on small business units and local economies. This, in the end, will result in bottom-line failure with regard to ensuring fair pay to undermine its contribution to India’s economic growth.

Brain Drain and Loss of Talent

The stagnation in the freshers’ salary is also causing a worrying trend of brain drain. The young professionals are finding employment abroad as they get disillusioned by the lack of fair pay and growth opportunities. The United States, Canada, and several European countries offer higher pay as well as better working conditions and career prospects.

This migration weakens the competitive advantage of India in the global IT market. While being a long-standing source of skilled IT talent, the loss of young professionals diminishes the ability of the country to keep its leadership.

Additionally, this influx of skilled labor strengthens other countries at the same time that India is weakening its talent pool and simultaneously needs to fill the gap with less experienced or underqualified candidates. Over time, this could compromise the quality of services offered by Indian IT firms.

Voices of Concern: Industry Leaders Speak Out

Major voices within the IT industry have spoken about the widening pay disparity, saying that these need systemic reforms.

Mohandas Pai Former CFO of Infosys

Pai has criticized the increasing practice of awarding executive-level professionals who have no interest in entry-level tasks. “The boards are rewarding CEOs and top executives more and more while neglecting the bottom of the pyramid. This is very wrong,” he said. Pai said fresher salaries must be increased to at least ₹5 lakh per annum. Adjusted to inflation and living cost, this would ensure a fairer distribution of wealth within organizations.

N.R. Narayana Murthy, Infosys Founder

Murthy has been an ardent advocate for fairness in corporate compensation structures. He has suggested that the CEO pay should be limited to 25–40 times the average salary of an employee, saying this would help restore equity and balance in organizations. A more modest ratio ensures that all employees, irrespective of their position, feel valued, says Murthy.

Kamal Karanth, Co-founder, Xpheno

Karanth admits that the advantage of the industry in terms of controlling fresher salaries is a factor of high attrition rates and extensive training required. However, he cautions this will not last for long. “The cost advantage of the industry has been to control fresher salaries,” he said. “But companies have to understand that it is not a long-term investment.”

Real Stories: The Human Impact

While statistics and expert opinions may paint a compelling picture, the depth of the divide is only understood through the lived experiences of employees. Freshers and mid-level employees have shared stories of financial struggles, professional frustration, and the psychological toll of working in a system that prioritizes profits over people.

Ananya’s Struggle

Ananya, a brilliant computer science graduate, joined one of the big IT firms in 2019 at a starting salary of ₹3.6 lakh. Over five years, it went up to just ₹4 lakh, barely keeping pace with inflation. Moreover, an individual living in a metropolitan would spend most of the earning on rent, transport, and other basic necessities, leaving very limited space for savings or even leisure. 

Despite always receiving outstanding performance reviews, Ananya says she feels herself trapped in a system which undervalues her inputs. “I joined with so much hope,” she says. “But nowadays, it is like running with no forward movement.”

Vikram’s View

Such glaring disparities exist in his organization, says Vikram, a mid-level officer who entered the company as a fresh recruit. “My pay has increased only marginally over the years, whereas our CEO’s compensation has doubled within a few years,” he says. “It hurts to see such inequality, especially when we are working hard for the company’s growth. At times, it seems that all our efforts benefit only those at the top.”

Addressing Pay Disparity in India’s IT Sector: Solutions and Recommendations

This unsustainable gap of Indian IT sector between wage-earning top executives and a fresher has created threats not only to employee morale, stability, and the economic factors, but also it deters the reputation of India’s IT industry, with all its meritocracy ideology on upward mobility. Some such systemic reforms require concrete measures and commitment for equally practice across the board to remedy pay disparity.

Mandatory Minimum Salary Increase

A significant step that can effectively close the wage gap is the mandatory periodic adjustment of the entry-level salaries as inflation and the cost of living continue to rise. During the last ten years, the salary for the fresher has experienced paltry increases with the changes far from inflationary increments. 

For example, starting salaries rose from ₹3.6 lakh in 2019 to just ₹4 lakh in 2024, a compounded annual growth rate of only 0.8%. This stagnation has eroded the purchasing power of young professionals and left many struggling to meet basic expenses.

Proposed Action:

Implement mandatory policies whereby companies have to raise the fresher’s salary annually by a fixed percentage consistent with inflation rates. Governments or industry associations could also provide some guidelines for minimum salary increment so that those at the bottom of the pay scale get a fair adjustment.

Regulated CEO-to-Freshman Pay Ratios

The most striking contrast is between the remunerations of executives and that of freshers. The pay of the CEO has increased by 835% between 2011 and 2024, while the remuneration of freshers has increased by a meager 15%. Such differential growth calls for intervention so that there is a fairer share of wealth within organizations.

Proposed Action:

Regulation on the pay ratio of the CEOs and average employee salary: The industry leaders like Infosys founder N.R. Narayana Murthy have proposed to introduce regulations on this parameter. He has proposed that the CEO salaries must not exceed 25–40 times the average pay of the employees. It will reduce the concentration of wealth at the top, and employees at all levels would reap the benefits of organizational success.

More Investment in Training

Training for New Workers: One of the prevalent reasons for low fresher salaries is the cost for training new employees to conform to industry standards. As much as training freshers is an expense, this should be considered a long-term investment. 

Companies use the argument that the big cost of training warrants little pay for entry-level people, but this is just ignoring the potential that better-trained employees can give even bigger returns.

Recommended Solution:

Provide more budget for training and development of freshers’ skill. This way companies could justify higher starting pay while equipping employees with the skills required to contribute from the earliest stages. Also, quality training programs would bring low employee turnover as new hire freshers feel appreciated for their work and can manage their job effectively.

Compensation Structure Transparency

Lack of transparency in salaries often heightens dissatisfaction with employees. Most freshers and mid-level employees would not know the justification process for the executives’ pay. In general, such detailed compensation reports would provide accountability and give confidence among the organizations.

Proposed Action:

Require companies to publish detailed annual reports that include CEO-to-fresher pay ratios, executive compensation criteria, and justification for salary increases or stagnation at different levels. This would make boards assess pay structures more critically and align them with organizational values of fairness.

Incentives for Employee Retention

High attrition rates are the major problem for the IT industry. Many freshers are leaving their jobs in a few years because they are unsatisfied with stagnant pay and growth opportunities. Providing meaning incentives can help retain the talent and reduce the costs of turnover, thus aiding the employees and employers both.

Action to be proposed

All this aside, performance-based incentives like bonus, stock options, and accelerated promotion for freshers based on their outstanding performance must be offered. This would reward them for their efforts and also give them a career ladder to climb up the ranks. Housing subsidies or education assistance needs to be initiated to help entry-level employees in their financial crises.

More Than Economic Solutions

This is an economic issue for the Indian IT sector, but this gives it a moral and ethical question for the heart of equity and opportunity. An industry once held out as a bastion of social mobility and meritocracy risks being characterized as a system that favors the privileged few. This gap is likely to dent the confidence in the sector and threatens its long-term sustainability unless arrested.

Rebuilding Trust in the IT Industry

IT needs to take bold steps toward a just and fair workplace to regain lost grounds and then continue to maintain its competitive edge. This comes from the value appreciation of every employee, starting from freshers to executives in reflection of fair compensation structures. Organizations, at large, must realize that money spent on fair pay is really an investment in their greatest asset: people.

A Sustainable Model for Growth

Suppression of fresher salaries to bring down the cost is myopic in nature. Through fair remuneration, companies will be able to create an enthusiastic and dedicated workforce that can increase productivity and lower attrition levels. Fair pay practices contribute to a healthier economy due to enhanced consumer spending as well as income equality.

The Road Ahead

Indian IT, as a sector, is one of the greatest forces behind economic growth, technological innovations, and employment for ages. However, the great achievement and potential that exist in this industry are going to be undermined by growing pay gaps. It thus requires collaboration from the industry, policymakers, and organizations concerned.

Compulsory changes in salary scale, regulated pay ratios, additional investments in training, disclosure of pay and retention of workforce all fall in the bracket of solutions as well as imperatives. It is through them that the IT sector can again reaffirm commitment towards fairness, equity, and opportunity for one and all, thus continuing its symbol as an epitome of progress and prosperity in this transforming world.