IT Salaries 1998
By John Boyd Salaries foreign firms in Japan pay information technology specialists are going through some significant changes. Higher demand for IT Specialists, increasing requirements for a wide-range of computer skills yet a dismal economic climate are all impacting it remuneration. Computing Japan Magazine examines salary trends and what employees, and employers, are saying about them. It is often said that change is the only constant in the information technology industry. But does this notion necessarily apply to the IT salaries foreign firms pay in Japan? Leaving aside the yearly cost-of-living increases most industries pay, the question is not easy to answer. Companies have created their own IT compensation schemes, which typically are composed of base salaries plus bonuses paid for performance and/or length of service. In some cases, expat perks can be added to the mix, and, even rarer, stock options may be included. Just what is an IT professional? It seems no two companies, even in the same industry, use the same job titles or job descriptions for this work. Keeping the definitions vague maintains flexibility and helps avoid the possibility of demarcation creeping into the workplace. Besides, how do you categorize and pay someone extra for having "a little UNIX experience," or "some C++ programming know-how"? Computing Japan Magazine uses the term "IT professional" to describe those directly creating, implementing, maintaining or supporting information technology systems and applications. Over the past four years, Computing Japan has conducted three informal surveys on IT salaries paid by foreign firms in Japan. As in the previous articles, given the sensitive nature of asking people about their salaries and their company payment plans, all the IT professionals interviewed were offered anonymity. Some of the 20 or so respondents interviewed for this article talked only in terms of gross compensation, while others could only give net figures. What's more, few could say what income tax bracket they fall in, which, of course, depends on each person's individual tax status (single or married with children, other dependents, etc.). Since 1996, when we last interviewed IT professionals regarding salaries, some overseas companies looking to expand rapidly in the Japanese market have cranked up their IT compensation schemes in order to attract staff and expand their IT departments quickly. On the other hand, other firms that are feeling the squeeze from the economic downturn have made little change in what they pay their IT professionals during the past two years, and in one case, salaries for new hires have actually been frozen. "There are significant differences (in IT payment schemes) between industry segments," says Michael Alfant, president of Fusion Systems Japan, a Tokyo-based IT services company. "In general, foreign securities companies are at the top, technology companies like ours come next, and then you have everyone else." In the case of Fusion, Alfant says, "We're not interested in the market variances and the extreme fluctuations that you find out there. We maintain a coherent salary structure that's evolving over time, based on the value of each person to our company." Base salaries, he adds, haven't changed significantly since 1996, perhaps 5% to 8% to reflect the typical annual increases in the industry. On the other hand, he says bonuses have been good over the past several years, and he points out that Fusion is one company that offers its staff stock options. By contrast, some heads of IT departments in foreign financial corporations note that salaries have risen 10% to 20% over the last two years. Says one IT senior manager of a major US securities company, "We have noticed a trend in the (securities) market. I don't know whether it's because of currency fluctuations, the Big Bang or otherwise, but I'd say things have jumped up 10% or so in the past year for technical people across the board: NT, UNIX, networks, basically everyone with marketable technical or engineering skills." The head of an IT department at a European bank agrees. "Salaries have gone up significantly (since 1996) mainly due to having good staff picked off by competitors, forcing us to go out into the (job) market and hire new people," he says. But a member of an IT department at the branch of another European bank says, "Salaries haven't changed here much since 1996, though certain individuals have had significant increases." An IT director at a multinational financial services company confided that substantial cuts had been made in the salaries of new hires in the higher income bracket. However, he added that he didn't expect this situation would continue much longer, given the need to remain competitive with other companies in the industry. Many of those interviewed divided IT personnel into four rough groups: college graduates and those with little IT work experience; people with about five years of IT work experience who can supervise a network or a particular technology such as PCs; managers with up to 10 years of work under their belts; and senior managers or directors who can count 20 or more years of experience in IT. As expected, some of the highest salaries are paid in the financial industry, with securities companies often leading the way, though with two notable exceptions. An IT senior manager in a US securities firm put his compensation last year at around \20 million gross, including bonuses and allowances. The other exception came from the head of a European bank's IT department, who gave the same figure as net income, though this included school-fee allowances for his children and the payment of membership fees at a private club. In rare cases, payment at the top can reach as high as \30 million, though this usually entails increased responsibilities and probably includes a title like "representative director." "Even in the bubble years these people (in the \30 million bracket) were the exceptions," says a US securities IT senior manager. "And you can still find one or two around today. But they don't usually get that five years in a row. It tends to get very political at that level, and they can be the first to go (when there are problems)." One of he highest salaries quoted was \24 million net, plus expat benefits that included allowances for housing, a car and private club fees that brought compensation close to the \30 million mark. This is paid to an expat IT senior manager of a major European industrial materials manufacturer. A US-based telecommunications company that is offering \25 million net, plus bonuses matched this, for a director of IT. "We are looking for someone who is completely bilingual who can represent us at the highest level with our customers around the world," says the company's director of engineering and marketing. "But even at \25 million we can't find the right person. That's scary." At \18 million annually, an IT senior manager at a European bank placed his salary pretty close to that of his colleagues' in the securities industry. But beyond this example, compensation drops significantly to \14 million or \15 million gross for several heads of IT departments working in European and US manufacturing companies. IT professionals several steps lower on the IT ladder, often with the title of supervisor, manager or administrator, generally have the role of looking after a specific technology such as a network, the telecom system, UNIX installations, or perhaps supervising in-house software development. Depending on the industry, payments typically range from \8 million to \14 million gross for someone with 10 or more years of experience. Not surprisingly, those focusing only on programming may get paid considerably less, though again it depends on what's being programmed. An information systems manager of an overseas automotive-related corporation says a programmer in the IT department with eight years of experience earns just Y5.3 million. The company was paying an agency almost double that for a programmer with skills in programming IBM's midrange AS/400 series computers working on a long-term contract. Chris Ohta, a PC programmer with Credit Suisse bank, candidly reveals he earns \9 million annually. Five years ago as an IT manager with the same bank, Ohta was earning \10 million. "I decided I didn't like the managing part and just wanted to code," he says. "I suppose if I'd stayed a manager, I would be earning \11 million or \12 million now." At the entry level, salaries ranged from \2.5 million to \6 million. Companies in the financial industry typically pay the highest salaries, usually to those who already have some solid work experience. It also depends on the individual company and its particular needs, whether it will employ someone straight from college, or take someone from in-house and train them in IT. "I interviewed qualified engineers, consultants and IT managers, but I ended up hiring a Japanese woman with a Masters in Library Technology from a US university," says the manager of IT systems at a US-based law firm. "She's a talented, driven woman wanting to get into IT. By training her and giving her the opportunity to get some credentials, I get my network looked after for about a 30% salary savings." This female employee's starting gross pay was \5 million, while the manager of the two-person IT department earns \10 million gross. "If we see someone good inside the company, if she's a good worker and we know her background, then we'll train her," says an IT director of a securities company. He also adds that when it comes to hiring college graduates, the degree doesn't mean much. More important, he says, is the person's enthusiasm for technology. Another IT director in the financial services industry says, "We don't spend a lot of time on college grads. It's a lot of work to train them." In the heyday of the bubble economy, Japan became something of a mecca for top foreign IT professionals, who could pick up envy-generating expat compensation packages. Things have changed due to today's economic climate, of course. Nevertheless, there are a fair number of companies still paying expats significantly more than local hires. Says one IT manager with a European manufacturer, "Overseas hires get substantially higher payment, about 50%, compared to local hires. This includes housing, home leave and additional payments to cover the higher expense (of living abroad)." A previously mentioned expat IT senior manager of a European manufacturer is earning about \30 million annually, when all expat allowances are added to his base salary of \24 million net. But those expat packages could be shrinking in their size and numbers. An IT services company with professionals from about 20 different countries makes no distinction between local and overseas hires. "We've never offered expat packages," says the company founder. "Payment is based on talent, aptitude, ambition and ability. You can still find a (corporate) managing director or a country manager receiving a good expat package. But I think it's a dying practice, though there are still some around," he says. "The expat packages continue today, although our top management is trying to reduce the number of expats," says a chief information officer of a European manufacturer. In some rare cases a company will offer stock options as a way to create loyalty and deter poaching. "We believe our stock option scheme is unique," says Fusion's Alfant. "It's based upon seniority and position within the company. It includes every employee (including non-IT people) of the company, except for those that already own "hard" (non-option based) equity." For their part, IT employees can't forget that they must pay more income tax as they enter higher income brackets. As a rough guide, average percentages of income tax paid on employment income are given in parentheses for the following annual gross income: \3.3 million to \9 million (20%); over \9 million to \18 million (30%); over \18 million to \30 million (40%); over \30 million (50%). There's also inhabitant's tax to consider, which ranges from 5% to 15%, depending on income. When it comes to reviewing and setting salaries, several companies in the financial industry reported taking part in independent benchmarking schemes conducted by several different business consulting companies. The head of an IT department with a European bank explains how it works. "We don't have a set corporate scale for salaries. We are driven by the competition in the market," he says. "Some foreign companies like ours participate in salary surveys, and we see figures from the survey based on job descriptions and ratings. We need to be paying near the top to attract and retain qualified staff." An IT director at a US securities company adds, "By using this service, we at least know if we are paying competitive salaries." IT skills in demand (besides those mentioned elsewhere in this article) include knowing how to operate Enterprise Resource Planning (especially SAP's R/3), database programming (particularly Sybase and Oracle), Visual Basic and Computer Telephony. While companies may hire specialists, in practice they often want generalists. One IT managing director in the financial industry, echoing the sentiments of many interviewed, says, "When we hire someone, we look for a particular skill. But after he starts, we move him around (so he can) acquire new skills and get to know new technologies." "We want a combination of UNIX and Microsoft's NT," says an IT director in the securities industry. A systems supervisor at a telecom infrastructure manufacturing firm says, "Here's a quick list of what I take care of: NT servers, Lotus Notes, Microsoft Access, user training, user Help Desk, systems purchasing, PC server installation and ERP project management and analysis." One non-technical skill that is often mandatory should also be taken into consideration: bilingual ability. In some cases it is not required at all, if the job role doesn't directly involve end-user contact, for instance. But in situations where the end users are non-Japanese, a Japanese IT person is expected to have bilingual skills as part of their resume, as is a non-Japanese when working with Japanese end users. The head of an IT department at a securities summed up the situation. "Bilingual skills are required for some jobs, but not for others. There is no extra compensation for bilingual ability, but it can be a plus when it comes to deciding who will be promoted." John Boyd writes the Industry Eye column and is a regular features contributor to Computing Japan.
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