Salary squeeze

FRAMINGHAM (10/23/2003) - It's deja vu all over again.

For the second year in a row, most of the IT professionals who responded to Computerworld's annual salary survey received only modest pay raises, as well as flat or smaller bonus amounts compared with previous years. The average raise of this year's nearly 15,000 respondents was about 6.7 percent. On the bonus front, 71 percent of workers reported no change in compensation from a year ago. Meanwhile, the 15 percent of workers who reported decreases in bonuses said they fell by an average of 45 percent.

This is also the second consecutive year that some IT workers saw their paychecks shrink as a result of company-mandated salary reductions, which outpaced average pay raises this year by more than 2 to 1. While fewer workers reported pay cuts this year -- 8.6 percent compared with 9.5 percent last year -- this year's group was forced to forfeit the same amount as last year's -- an average of 13 percent of their base salaries.

But most IT workers aren't as unhappy as you might expect, given this year's pay figures. Compared with the 4 percent average increase in pay for U.S. workers reported by the U.S. Department of Labor's Bureau of Labor Statistics, IT workers are holding their own in a tough economy.

In fact, only 22 percent of workers said they are dissatisfied with their overall compensation, even though many are working longer hours and shouldering heavier workloads because of permanent staff layoffs at their companies. Nearly 70 percent of IT professionals report regularly putting in more than 40 hours a week on the job, with one out of every four IT professionals working between 46 and 50 hours a week.

More than half of all IT workers -- 54 percent -- are satisfied with their overall compensation, and nearly all of the 40-plus IT workers, managers and CIOs interviewed for this story said they consider themselves lucky just to have a job in IT.

More Than Money

Consider the case of Diane Foote. A Unix systems administrator at Accelrys Inc., a pharmaceutical software and services company in San Diego, Foote is earning the same amount of money she was earning more than two years ago. "In those two years, I was laid off, rehired as a consultant, and then my contract ended. I found (this) job fairly quickly but took a cut in pay to get it," she says.

Is she satisfied? "Money isn't the most important thing about a job to me," Foote says. "The benefits at my new place are good -- three weeks of vacation to start and an on-site health club. So, I'm happy . . . to have found a job so quickly in this economy."

Joyce Young, the CIO at CP Kelco US, a manufacturer of food ingredients, says economic pressures translate into lower salaries for most IT workers, particularly middle managers. "The market trend in Chicago right now seems to support lower salaries for IT, especially at the director level -- around US$120,000 to $150,000. People who used to be making the high end of this scale are accepting positions at the lower end," says Young, who works in the Chicago office of Wilmington, Del.-based CP Kelco. In the next 12 months, her company will hire two senior managers for IT projects focused on CRM and supply chain improvements. Their salaries will be determined by local market trends, Young says. Right now, she notes, "there are still many IT people out of work, and that seems to drive salaries down."

Lower-cost offshore outsourcing is another factor contributing to flat or decreasing salaries for IT workers, says Ron Glickman, CIO at San Francisco-based DFS Group Ltd., which operates 400 duty-free retail shops at airports and other sites worldwide.

"In our global economy, IT work flows to the lowest-cost and highest-quality provider. We're doing more this year than ever before on half the operating budget," Glickman says, thanks largely to his company's outsourcing deal with Teaneck, N.J.-based Cognizant Technology Solutions US Corp.

"I can't afford to hire master (IT) skills, so I buy master skills from an offshore partner -- and only for the hours that I need them," Glickman explains. On new IT projects, DFS, which has reduced its IT workforce significantly, typically outsources 70 percent of the work to Cognizant contractors offshore, retaining 30 percent of the work in-house. As projects mature, the mix shifts to 90 percent offshore, 10 percent in-house, he says.

DFS isn't alone in shedding permanent employees -- and the fixed labor costs associated with them. Allmerica Financial Corp., Corning Inc. and MetLife Inc. have laid off IT workers over the past 12 months. However, they did so at the risk of being perceived as less-attractive employers to the expert IT workers they'll need to hire once the economy bounces back.

Once a company has laid off employees, "the psychological contract is broken," says Gartner Inc. analyst Diane Berry. "Many C-level executives don't get that. They underestimate the impact of what layoffs mean down the road."

CIO Phil Go has no illusions about the impact of layoffs. His employer, Barton Malow Co., a construction management firm in Southfield, Mich., has laid off IT workers in the past 12 months. Now, Go says, he needs to demonstrate how much he values the remaining IT workers. If he doesn't, "when times are good, (I) would expect a mass exodus because they would feel taken advantage of," he says. "So we still give good -- but not great -- salary adjustments of between 3 percent and 6 percent. It's not great, but it's not zero."

In an unusual twist, Chetan Shah, executive vice president of technology at Synygy Inc. in Conshohocken, Pa., hasn't laid off IT workers. Instead, Shah has reduced the salaries of certain average and below-average IT workers to fund pay raises and bonuses for valued software engineers and other IT employees he wants to retain at the software and services company. "Reducing salaries is the last thing you want to do, but we have done it," Shah says.

Even bigger morale-busters than pay cuts are the daily fear of being laid off and the lack of job security in IT overall, sources say. One indicator is the accumulation of unused vacation time at many companies, says Linda Pittenger, who specializes in IT human resources at Gartner. "The underlying theme in people's minds is, 'I need to be here and be visible. If there's another cut, I need to be here to survive it,' " she says. "A lot of people have given up what we've worked so hard for on work/life balance."

As for job security, James Tow, who earns a salary of $67,000 as a database developer in Idaho Falls, Idaho, put it this way: "After being laid off three times, I have such a profound sense of paranoia, I don't think I'd feel secure if the owner came here and gave me the keys to the building." Asked about the likelihood of a salary increase, Tow recalls the go-go days of the late 1990s. "We had the mind-set that we could walk out the door and on the same day walk in the door of a company down the street and get a raise and a signing bonus.

"Frankly, I think management is a little resentful of IT because they were almost beholden to us then," he says. "So, I don't foresee IT salaries going up more than a basic cost-of-living increase. We're back in the same boat as everyone else."

SIDEBAR

Boost Your Chances of Getting a Raise

Before you march up to your manager to demand a raise, keep in mind that money is just one piece of the compensation pie, experts advise. First, calculate the value of company-provided training, medical and dental benefits, retirement savings plans and spot rewards such as an afternoon off or a $200 gift certificate here or there. It very well could turn out that your overall compensation is indeed in line with that of your peers at other companies, or at least those in your geographical area.

"Salaries vary so much by region and industry that you really need to compare apples to apples," says Laurie Levenson, president of DirectAccess Technology Staffing Inc. in Carlsbad, Calif.

That said, Levenson and others note that there are certain IT skills for which companies are willing to pay a premium right now. On the technical side, .Net experience is perhaps the hottest skill, with network security experience running a close second. On the management side, says Gartner Inc. analyst Linda Pittenger, "we're finding (that) strategic planning or any role that enhances resource utilization, such as IT alignment skills, are the ones getting paid more. These include IT architects and IT sourcing officers and people involved in project and portfolio management and process improvement roles."

IT professionals with data mining and business intelligence experience could also get raises, says Katherine Spencer Lee, executive director of RHI Consulting in Menlo Park, Calif. Specifically, these include professionals proficient with software tools from SAS Institute Inc., Business Objects SA and Cognos Inc.

Regardless of your specific skills or experience, Levenson offers this advice: "Work with management on agreed-upon measures and get a commitment that if certain goals are met, a raise is received. That's a much more effective way to get a raise than to take a salary survey in there and demand it."

SIDEBAR

WHO THEY ARE:

Eighty-two percent of the respondents were men, 90 percent were employed full time, and 70 percent had a bachelor's degree or higher. The respondents had an average of 13 years in IT, and their average age was 39. Forty-four percent indicated that they have some level of certification.

Thirty-nine percent of our respondents indicated that they were in management, whereas 61 percent said they held staff or technical positions. Five percent said they were employed as contractors or consultants. The most well-represented industry was computer services/consulting, with 20 percent saying they worked in that field. Eighty-three percent have been in their current positions for an average of four years.

More than a quarter (26 percent) of the respondents said they hail from the North Central U.S., making it the most well-represented geographic region, followed by the South Atlantic (19 percent) and Pacific (15 percent) U.S.