Compensation and the IT Sector

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.


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.

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