Pay packages and perks: What are IT skills worth?

It still pays to be in IT. Whopping increases and "out of this world" salary offers may have slowed down, but it`s still more profitable to be a professional in IT than in other industry.

The simple rule of supply and demand applies. As information technology is more important than ever to the success of almost any business, the demand for the people who can design, operate and manage IT systems continues to exceed supply. Add to that the South African brain drain and you have a scarce pool of skills that is literally worth its weight in gold.

But South African IT professionals` earnings depend on many factors, mostly on technology and management skills and experience, but also on who they work for, where they are located and - sadly - on their gender, race and age.

Results of the ITWeb 2001 Salary Survey show that the average basic salary last year was R224 000, up from R170 000 the year before.

The median basic was R220 000. This translates into R18 300 a month, which according to recruiters, is somewhat above the real-life average. Janette Cumming, a director of Paracon Holdings (formerly MD of recruitment specialist Dimension Data SilverLine) says a typical salary for an IT professional is close to R18 000, depending on benefits. "If you earn R18 000 and a full house of benefits, that`ll be well over the average," she notes.

Money talks louder than benefits when it comes to package structure, as shown by the smaller than typical difference between the basic and the total annual package.

"The basic to total package ratio of 18% reported here is a lot lower than the national average," comments Mark Bussin, a partner at remuneration consultancy 21^st Century Business and Pay Solutions. "Typically, if you are at the top end - a director, CEO or MD - you`d have a 60% cash and 40% benefits ratio. At the low end, all you`d get is medical aid and pension, so it`s typically 90% cash, 10% benefits.

"A conclusion one can draw is that IT folk are getting a lot of cash and prefer the cash to fringe benefits."

Hype is a thing of the past

The survey shows that the hype that pushed IT salary increases well over inflation levels is over.

The median basic salary reported is R220 000. Prior to last raise, the median basic reported was R201 000, which shows an average salary increase of 9.45%

This drop in increase percentage from 18% reported the previous year signals a shift to more down to earth IT salaries.

"Last year`s 18% average salary increase reported was roughly double the national average," comments Mark Bussin, partner at remuneration consultancy 21<sup>st</sup> Century Business and Pay Solutions. "This year`s 9.45% is more in line with the evident slowing down of the industry, but still even exceeds the national average for directors, which is 8% or 9% this year."

A nudge or a leap

Cumming points to an even more conservative trend at big corporates, where increases typically range from 4% to 8%.

Therefore, for a professional staying put in the corporate environment, there are small monetary hops rather than leaps and bounds. "Typically, for an IT person sitting and doing the same job, who has grown a little bit in the year but has not been promoted, you`ll see 4% to 8% if you are lucky, and the top, top achievers will see 10%. We`re finding that there has to be some other factor that gets you more than 10%," says Cumming.

The "factor" Cumming refers to is a change of job or switching to a contract. "People who are changing jobs will often see a 20% to 40% increase. A person switching from permanent to contract can even double their salary."

Jill Hamlyn, MD of the People Business, hints at even tougher times looming when it comes to salary increases. "We need a maturing in the market. It`s a nice custom, but there`s no law that says you have to have a salary increase."

She adds that the practice of a guaranteed, albeit minimal increase, every year gives no leeway for performance management. "Everybody wants to hold on to this 10% to 15% cost of living increase. But if everybody gets a salary increase, companies have less to give their star performers."

Hamlyn urges managers to "give people the opportunity to earn what they deserve, not what everybody else is earning".

Multi-millionaires

Judging by the gap between top and bottom earners in our sample, the IT industry seems to be already applying this kind of compensation strategy. The salary range is phenomenal, from a huge annual package of R2 million for top managers to a meager R50 000 a year for some support and operational staff.

But to hit the million mark, you must have that rare combination of next-generation technology and top management savvy.

Only 25 professionals out of the 3 788 respondents reported a basic package exceeding R1 million, nine of them being women.

The top earner, who pulls a total package of R2 090 000, is a white male, with five to 10 years in IT, working over 10 hours a day. He is general manager for a South African-based e-commerce company with large offshore operations.

But such IT millionaires are few and far between, warn recruitment and remuneration specialists, who are wary of unrealistically raising expectations or creating resentment among IT staff. "The salary of R2 million is roughly double what an IT director would earn in a large corporate, for example SA Breweries or Anglo Platinum," says Bussin. "It could be that these are owners of companies, who earn far more than corporate employees."

Cumming says her company is placing top IT executives and is not seeing nearly as high salaries offered. Hamlyn concurs: "A CEO, a top person driving a company to success, can earn R2 million in total earnings [basic, fringe benefits, incentives and share options]."

She says a R1 million package is typically offered to a senior executive, and can scale up to R1.4 million or even R1.6 million. Hamlyn notes that R2 million seems to be on the extreme outer perimeter.

Andries van Wyngaard, MD of resource consulting company Prodyn, also expressed incredulity at the packages around the R2 million mark. "This is phenomenal. A salary this high is out of line, unless the person has fantastic sales or business skills, the ability to clinch multi-million rand deals, or globalise IT functions, for example."

The survey queried respondents about their current areas of work, as well as the one area requiring the highest level of skill. General IT management, application development and intranet appear as the prevailing areas of employment.

"Interestingly, application development remains a key area of employment, in spite of the expected dominance of package suppliers," comments Gary Chalmers, MD of IT training company Torque-IT. "Employment in enterprise resource planning (ERP) systems and data management appear as declining areas as companies move away from large, centralised systems."

Predictably, the areas of largest and therefore fewest implementations, such as data warehousing, telecommunications and data centre management, employ the fewest skills.

As to the single highest skill needed for the job, 20% of the sample said it was general IT management, followed by 16% involved in application development and 17% in data centre management.

E-commerce, a much sought-after skill, doesn`t come up at all as the highest area of work. This indicates its newness, but is possibly also the result of e-commerce falling under larger Web development or application development projects.

It`s not only the skills, but also the responsibility that comes with a job title that affects salaries.

It`s no surprise that managers earn the most, reporting a median annual basic exceeding R390 000.

At the bottom of the scale are help desk and IT support staff, whose median basic is just over R170 000.

A fair measure of job responsibility is the number of people reporting to a person. This finding confirms the logic that the more people who report to you, the higher your responsibility and the higher the salary.

The only anomaly comes at the very top, with the managers who have over 500 (three respondents) and over 1 000 (one respondent) people reporting to them. They reported a somewhat lower median salary than their colleagues who manage less staff.

However, the vast majority of techies are loners. They may not work in dark, solitary cubicles, but ITWeb`s survey shows they prefer freedom and independence over managerial responsibility. Some 44% have no staff reporting to them, and a further 37% manage teams of up to five people.

Stability vs bigger bucks

When it comes to employment contracts, most prefer the stability of permanent employment to higher paying, but somewhat risky, freelancing and contracting. Some 86% of respondents have permanent employment and they evidently trade off the stability and benefits for more cash: they reported a median basic of R217 000, while contractors reported earning 24% more and freelancers 30% more than permanent workers.

Van Wyngaard estimates that around 80% of local IT professionals would prefer contract work if they were able to get it. "Contract work gives the IT professional a far higher salary and certain tax benefits, and the company has the advantage in paying for skills only when it needs them, without the overheads and admin involved in a permanent employee."

Paracon`s Cumming warns that contracting is not for everybody: "There`s a certain type of person who does very well as a contractor - young, single people, or mothers who have a working husband or someone who has been retrenched or recently returned from overseas - for those kind of people contracting is brilliant. And then, there`s a profile of a person who should never ever contemplate it, such as a single earner who is in a high risk situation - has someone sick in the family, for example. The risk of being out of work has to be considered by these people."

The age factor

Despite the general youthfulness of the industry, the older and more experienced you are, the more you earn - but only up to a certain point. Beyond the 45-year-old mark, salaries start dropping, so that people between 46 and 50, on average, earn less than the younger age groups.

"The pressure is especially on those over 40 to keep abreast of new developments," says Van Wyngaard. "Sadly, most companies are looking for dynamic, younger employees, regarding over 40 as 'over the hill`. I still believe if a jobseeker has the dynamics and experience, he or she should be marketed as a valuable employee."

Quality vs qualification

One popular image of techies is as whiz-kid varsity dropouts with certifications rather than degrees to their name. This survey shows that formal tertiary education is valued, therefore the higher the degree, the higher the salary - with the exception of people with matrics, who reported a higher median basic than those with a technikon diploma.

Having only a matric in their formal education history didn`t hinder some professionals from getting into the millionaire league. In fact, out of the top five earners, four only have a matric. However, according to Cumming, today it`s almost impossible for people with only a matric to get into IT, unless they know somebody who can help them get into a company on a personal recommendation.

Highest paying industry

Over half of the respondents work in the IT industry and their median basic was R230 000. But some IT staff working in other environments are being paid more.

The highest median basic of over R250 000 was reported by those working for parastatals.

Less of a surprise is the second best paying industry - consulting, with a median basic of R242 000. Professionals in the telecommunications and banking or financial sectors are also well off, earning over R230 000.

Location, location, location

IT workers with aspirations of making big bucks in IT should head for Gauteng or the Northern Province.

The 65% of respondents working and living in Gauteng earned the highest salaries, with a median basic of R235 000. They are closely followed by the 13 professionals based in the Northern Province, while by far the lowest IT salaries are paid in the North West, where the median basic was only R145 000.

Comment by Janette Cumming, a director of Paracon

The current trend is to promote dynamic, young IT professionals to senior positions, and to pay them high salaries to keep them there. This is resulting in a sad tendency for older IT people to try switching from mainframe to client/server or Web development in search of better rewards. Many of them do this at their own expense, only to find that they still cannot get the jobs they are aiming for. Re-skilling and keeping up-to-date with the latest technologies is important, but it is only part of a total strategy to remain a marketable commodity.

Unfortunately, older people are at a disadvantage because the younger IT professionals cut their teeth on IT. They left school able to market, put documents together and design Web sites. These young people are prepared to start work on a lower salary, and so are given the opportunity to prove themselves and advance rapidly. Many quickly move on to become marketing managers, CEOs, MDs or FDs.

An older professional would cost more to hire, and so stands less chance of getting the job at the outset. To compete in the same league as the younger professionals, the older professional has to find a way in - through a contact, by moving to a different division of his company, or by accepting a huge salary cut and starting from the bottom again. One way for older professionals to start afresh and maintain a good income, is to draw on their maturity, years of experience and entrepreneurial flair to become contractors.

Luckily for the older IT professional, the IT industry is constantly evolving, which means that anyone who stays innovative and a step ahead of developments, stands a good chance of success - whatever his or her age.