The Salary Wars

It’s placement time again and those obscenely high salaries keep getting flashed across all forms of media. Add 20 – 50% to last year salaries and the Indian media gets a good story to write about the B-School placements. This happens year after year and this year is no different. Few years ago, there were limited news channels and hence the hype and hungama was restricted to print media. With the news channels doing whatever it takes to bring the news to you, it was natural to expect them to cover the placements this year. As mentioned by many others, it is inappropriate to convert foreign currency salaries to Indian rupees.

The unwritten rule is that records need to be broken every year. B-Schools also wan’t to be in the headlines in claiming that their student managed to bag the highest salary. B-Schools have been following a cautious approach and try to reveal the salary details only after other competing B-schools have revealed their numbers. This situation is somewhat akin to the IIT-JEE results where the various coaching institutes (Brilliant, FIITJEE etc) claim that they coached the Top 50 / 100 rankers. A quick glance at the ads by these coaching institutes will reveal that an identical list is splashed across the leading newspapers. Although it is possible that some of the top rankers could have enrolled with multiple coaching institutes (through postal and/or classroom coaching), it is a bit unbelievable to see an identical list.

Domestic salaries don’t lag behind

With the Indian economy booming, one would have anticipated a spurt in the domestic salaries as well. When I read that the highest domestic salary of Rs. 34 lakhs was bagged by an IIMA grad, the names of top-notch MNCs (particularly Investment banks and consultancies) came to my mind. After reading the full report, it came to light that an old economy veteran (RPG Group), was the one to dole out the Rs. 34 Lakh package. Economic Times carries a small bio of the person who has managed to bag the highest domestic offer.

Surya Prasad (42) laughs when you ask him about his Indian Institute of Management-Ahmedabad (IIM-A) experience. “It was quite an experience studying with 20-year-old students some of who were not even born when I started work. That’s the charm of studying at the business school,’’ says the Chennai-based deputy inspector general of police, who graduated from the IIM-A this year.

Prasad is hero of the IIM-A with highest domestic salary offer of Rs 34 lakh per annum, beating last year’s Rs 14.5 lakh. Prasad, a 1988 batch officer of Tamil Nadu cadre drawing Rs 25,000 per month, says, “My promotion was due soon.

Surya Prasad has more than 15 years experience. This might be the highest salary as per the record books, but it is misleading to club such outliers with the average salaries and project it in the front page of national dailies. With the increasing emphasis on laterals in the placement process, it might be better to release two sets of averages (one for the laterals and one for the regular hires).

IIM’s as a placement agency

If the Finance Ministry has its way, it might end up levying service tax on the revenue earned by the IIM’s in the campus recruitment programme.

Director of IIM, Ahmedabad, Bakul Dholakia, said the IIM-A had already told the Ministry that it was an educational institution and not a "manpower recruitment agency."

Mr. Dholakia agreed that the IIMs did charge a fixed amount from the companies coming for campus recruitment at $5,000 per overseas placement and Rs. 50,000 per domestic placement.

A back-of-the-envelope calculation reveals that IIMA could have earned about Rs. 3 crores through the campus recruitment programme this year. The revenue for the other IIM’s could be slightly lower depending on the number of overseas placements they have had.

The IIM’s are subsidizing the fees of the students hoping that they can make up for it through the campus recruitment programme. Hence the revenue earned from the campus recruitment is not strictly revenue, but it goes towards making up for the lower fees. This looks like a fair argument and it would be interesting to see the outcome of this tussle. Lot of other educational institutes collect placement fees from corporates (Institute of Chartered Accountants of India is one name that comes to mind). I’m not too sure whether the Finance Ministry plans to bring all such institutes / educational institutions under the Service Tax net.