Pay Cuts in Sri Lankan IT Sector !!

Image Credit — Ada Derana Biz

Sri Lanka IT sector is known to pay higher salaries than most of the other sectors in Sri Lanka, part of the reason for the higher salaries is due to the limited talent pool available within the country. Unfortunately, companies keep raising salaries to attract good people but that does negatively affect the overall industry as when the average goes high, return on the investment becomes low as well as increase the operating costs of a company. A prime example is many startups are struggling to attract good people outside its founders due to a higher base salary standard set by the rest of the industry.

Ultimately this forced most companies to work with lower margins affecting overall reserves. This race to higher salaries started about 5–6 years back and peaked about 2 years ago ( we saw almost flat starting rates for the past two years ) and that was an indication companies were reaching maximum they could practically afford. So even before corona salary increments in the sector was already started to slow down and settle.

Then hit the Corona !!!. most IT sector companies were riding on the thin ice even before this and now they are struggling. But not all companies may struggle. As an example, core IT/ Infrastructure sectors like telecom, online productivity tools ( ex- zoom ), direct to consumer services (e-commerce ) will thrive on this crisis in the short term and enterprise solutions like travel, manufacturing, ERP sectors may struggle to get new revenue other than maintenance for while.

All in all, depend on the sector they are operating and how strong the financial situation is, most companies will look towards pay cuts and even extreme of layoffs to mitigate the lack of cash flow. As an example, if a company is running based on short term subscription or project payments they will see an impact on the cash flow immediately. whereas long term contract/subscriptions based ones are embracing the impact on future cycles.

So in reality, pay cuts and ( sometimes ) layoffs are inevitable if the situation continues. Most companies started some sort of pay cuts as an initial measure while monitoring the situation. As an employee, yes its hurting to see your paycheck get reduced but if the circumstances are fair you have to accept it.

Fairness of pay cut In my point of view,

1. The company should first look into reducing unnecessary expenditure ( ex — having new stock of company-branded swag is not important than salaries ) ( ex- purchasing new equipment unless in a dare need can be considered as unnecessary )

2. payout structure need to be fair (especially on the employees with lower 15% of salaries — need to make sure they get enough for basic survival )

And I personally believe flat pay cut percentage is fair in most Sri Lankan companies which maintain symmetrical bell-shaped salary distributions. The only instance it won’t be fair is when top management gets exuberant salaries compared to other levels.

That’s the reason I say

"This Situation will be a good litmus test on the loyalty of both Employees and Employers"

By this definition, if your salary being reduced under fair circumstances, as an employee you should be considerate of the company right now. And in my opinion, if you were happy with the setup before the pay cuts, it is too early to jump the ship and come to conclusions

If you are absolutely sure you are being treated unfairly or already fed up with the setup before pay cuts, it’s up to you to decide.

Basically , it’s too early to be worried about the pay cuts. Because some companies will try to hold on for long now and may struggle in the future, while others may have cuts now and bounce back quickly. Even some may never recover !!!

I wish I could find that Chinese @#@#@ who wanted to have bat soup !!!