At first glance, results from the 2005 InfoWorld Compensation Survey show an industry looking up. As company performance has risen, so have salaries and bonuses in the IT
sector, suggesting the downturn is over. Jobs are to be had. Purse strings have loosened. In fact, many aspects of our survey
of 1,510 IT professionals indicate that “better” may be the norm. Yet beneath the surface, dissatisfaction and uncertainty
threaten to spoil any celebration of IT’s return to square 2001.
If anything, a closer look at survey responses reveals that years of tackling mounting workloads with less
money and depleted staffs have taken their toll on IT morale. Interdepartmental relations remain strained, as the business
side’s cost-center approach to IT has many survey respondents questioning their ability to get the job done. Despite an overall
expected increase in expenditures this year, IT departments in many sectors will in fact face even tighter budgets.
And with offshoring on the rise, fear that one’s job could move overseas threatens to further polarize many companies’ org
charts. Taken together, such factors provide significant evidence as to why, despite all signs of an uptick, IT professionals
have grown increasingly dissatisfied with their lot.
Going by salary alone, the warming trend hinted at in last year’s survey has proved true, as the overall average reported
salary increased for the first time in three years, up 2.7 percent. The 12.2 percent average gain in government and educational
organizations and the 3.1 percent average gain in the private sector have brought IT salaries back up to 2001 levels. Workers
at technology providers, however, lagged behind their peers; only 58 percent reported an increase in pay, as opposed to 70
percent for IT workers overall, despite their being significantly more likely to have received a raise this year than in 2004.
The fact that IT salaries in the tech sector remained relatively flat despite a 50 percent increase in average reported gross
company revenue may be more indicative of the depth of the recent tech-market trough than a begrudging of compensation dollars.
This year’s survey indicates a 57 percent infusion of cash into tech companies’ 2005 IT budgets, a hopeful sign of future
salary growth.
Pay for performance
Bonuses jumped this year, up 19.7 percent, making 2005 the year of the returning bonus. When combined with salary, bonuses
accounted for an average increase in compensation of 4.2 percent. This parallels upward trends in some market sectors, as
significant gains were seen in company-performance awards. Yet the percentage of respondents who reported no change in bonus
remained at 70 percent — as did the 44 percent of respondents who received no bonus at all. In other words, this year’s bonus
gains were the result of fatter, not more, checks. And where did these big bonuses go? Upward, of course, to senior management.
Managers further down the chain of command tended to receive bonuses for increased workloads.
New bonus structures for higher-ups may indicate a paradigm shift in employers’ approach to compensation packages. At a time
when managers and IT staff overall saw paychecks increase by 6.7 percent, senior managers actually reported a 3.3 percent
decrease in base pay, reversing the trend of a year ago — but they also saw a 36 percent windfall in reported bonuses. Evidence
suggests that bonuses may have found their source in profit sharing, as the percentage of those
who reported a profit-related bonus increased by 38 percent.
Whether the reduced-salary, bonus-as-incentive formula will prove the norm remains to be seen. But it’s clear that, dogged
by increased scrutiny of executive pay, companies are increasingly pegging top-tier compensation to company performance. And
with the Financial Accounting Standards Board recently pronouncing stock options a corporate expense, expect to see bonus
figures grow. “Cash is now king,” says John MacDonald, managing director of the compensation and benefits practice at KPMG.
“Long-term incentive programs, which used to be almost exclusively addressed through options, are more and more frequently
cash-based. The result of these changes is that the percentage of executive compensation paid in cash is increasing, and the
percentage paid through the grant of equity units is decreasing.”
On the downside, pegging executive pay to performance in downward trending or stagnant markets may take its toll on those
left holding only the smaller-salary portion of the compensation formula. Two-thirds of tech executives reported no change
in bonus. Worse, more than a third received no bonus whatsoever. Add the fact that 50 percent of senior manager pay cuts were
attributed to moving to another company due to layoff and 31 percent to standard companywide reductions, and it’s apparent
why 43 percent of top-tier tech employees are dissatisfied with their compensation, making senior IT managers 39 percent more
likely to be disgruntled than in 2004 — by far the largest jump in pay aggravation among the three employment categories.
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