•  Entities catering to local market unable to meet US dollar-pegged pay scale offered by others catering to foreign clients and generate income in foreign currency 

By Shabiya Ali Ahlam
 IT companies catering exclusively to the domestic market are struggling to recruit and retain talent as workers are actively switching to entities that have salaries pegged to the US dollar or other foreign currencies.

Unlike the IT companies that are catering to foreign clients, entities that are focused on the local market for business are struggling as they are unable to cope with cost escalations and to match the US dollar pegged pay scale.

Following the sharp devaluation of the rupee in March against the US dollar, the rupee has lost about 80 percent of its value.

Following this, a number of IT companies catering to foreign clients and earn foreign exchange announced plans to peg the salaries of their staff to US dollar or whatever the foreign currency they generate their income. 
This has resulted in the salaries of employees of such companies to increase in rupee terms given the sharp depreciation of the currency. 

“We are finding it very difficult to recruit new talent and retain such because everybody now wants to join a company where salaries are pegged to the dollar. This has become an additional issue on top of the other difficulties we are facing at the moment because of the ongoing economic crisis,” a senior executive of an IT company, which exclusively caters to local clients told Mirror Business on the grounds of anonymity.  When quarried about the development, SLASSCOM Chairman Ashique M. Ali acknowledged that the devaluation of the rupee has resulted in escalation in wages, though he directly did not comment on the difficulties faced by IT companies catering to local clients to hire new talent or retain existing talent.

He said the attrition has increased in the sector due to migration. 
“They (IT companies) will have to adjust their pricing to market conditions to sustain their businesses. In the short term, this will be difficult to do considering many of our economic sectors bracing for harder times,” Ali said.

ICT services sector is Sri Lanka’s fourth largest export earner with over 300 companies currently serving several industry verticals. As of 2022, the sector is estimated to be US$ 1.2 billion industry with over 80,000 employees engaged in professional services.