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Capgemini exec salaries divulged in annual report

As staff vote on below inflation pay rise

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Analysis As Capgemini staff were balloting last week on a below inflation pay deal for 2007, the firm published details of the pay increases that went to its top executives last year.

Capgemini CEO Paul Hermelin was given a 12.9 per cent rise, including both basic pay and bonuses, in 2006. His take-home, excluding expenses and director's fees, was €1.9m (£1.3m), according to the firm's 2006 annual report.

In the same year, staff outsourced from HM Revenue and Customs to work on the £8.5bn Aspire contract negotiated a 4.9 per cent basic pay rise. The Register understands the company never confirmed the details of bargained bonuses, but union sources say it probably worked out at somewhere between 2.5 and three per cent, bringing a maximum likely staff rise of about 7.9 per cent, four per cent less than the CEO.

Net income had nearly doubled that year to €293m, while revenue was up about 10 per cent to €7.7bn. The 4.9 per cent basic staff rise was a 17 month deal ending December 2006. In 2005, when it was negotiated, Hermelin was given a 39.16 per cent rise.

But Hermelin's not been raking in the hay when the sun ain't been shining.

In 2004 Capgemini posted a net loss of €534m and Hermelin graciously cut his pay by 16 per cent. While Hermelin had to make do with a paltry take-home of €996,500, staff just recently transferred from HMRC were enjoying a 2.9 per cent pay increase. But even they were having to tighten their belts and didn't get a bonus in their first year.

Former HMRC staff give only a keyhole insight into Capgemini's pay structure. They numbered just 450 out of around 2,500 staff working on the Aspire account in 2004. By 2005 there were just 350 former HMRC staff working at Capgemini under the guardianship of the Public and Commercial Services union (PCS).

We don't know what pay deals non-unionised staff got after the HMRC deal was won, but an educated guess would probably land you with a median somewhere around the level negotiated by the PCS.

Chairman Serge Kampf only received a 7.35 per cent rise in 2006 to a modest €1,282,000. However, he also jumped up 39 per cent the year before.

As for the rest of the group management team, it's difficult to track their fortunes back very far. A rough average saw their pay increase just 3.1 per cent between 2005 and 2006.

As for the future? According to the 2006 report, things are hopeful. Demand for IT services is being sustained by the industry's practice of "capitalising" on "labour arbitrage".

But there is more hope yet, which is exemplified in Capgemini's imperialist-sounding strategic plan - the "i3 program of transformation and conquest".

According to the annual report, the three i's (industrialisation, innovation and intimacy) symbolise the help Capgemini can give corporations that have had a taste of "transformation" and decided that, though they like it, they can't afford it. Capgemini will help them get their next fix by farming the work out to India.

Is this good news for employees? The unions are a little suspicious, while Capgemini's explanation sounds suspiciously ambiguous. While i3's realisation will require "sustained efforts" be made to "support the group employees", Capgemini's report explains: "This is what 'i3' is all about: transforming ourselves to help the transformation of our clients by investing in these three areas.

The report notes further that outsourcing to India has cut Capgemini's salary bill compared to revenues by 3.8 percentage points "despite a higher proportion of variable compensation paid".

"This was attributable to the fact that the bulk of the year's hires were recruited in India, where salaries are lower, or targeted young – and therefore less expensive – consultants," it explains.

This does not bode well for bargained pay-packets next year. The UK Treasury's Gershon cuts on public spending have already started to put the squeeze on budgets for projects like Aspire.

Capgemini was not available for comment. ®

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