Corporates in India are tightening their belts, with lower salary hikes — of around 10 per cent per year — becoming the new normal, according to a new report. Yet, Indian companies have again emerged as the best pay masters in terms of salary increases in the Asia-Pacific region.
The report, Aon Hewitt’s annual Salary Increase Survey, also points to a possible tightening of the labour market, with attrition rates in India hitting their lowest levels since 2009.
“With this year’s numbers we are seeing a confirmation of our view that Indian companies are taking very clear steps to arrest the steady increase in compensation budgets. The lower inflation rates in the economy has also helped companies in deciding on the reduced salary increases without creating too much of a disruption in the lives of employees,” Anandorup Ghose, Partner at Aon Hewitt India, said at the release of the report.
Attrition rate
At 16.3 per cent, India is facing the lowest average attrition rate since 2009, with the hotel and retail sectors seeing the highest attrition rates, of 26.4 per cent and 22.6 per cent, respectively. The most common reasons for attrition that have emerged from the survey are inequity of pay (internal and external), limited growth opportunities, higher education, and role stagnation.
“At an average pay increase budget of 10.3 per cent across India, HR managers will be pushed to ensure they are being more innovative and thoughtful in how they reward their top performers while ensuring they are able to retain and motivate the rest of the organisation as well,” Mr Ghose added.
The survey, of 700 organisations across 19 industries, shows that employers in India are predicting an average salary increase of 10.3 per cent in 2016, lower than the 10.6 per cent seen in 2015.
This still pegs India as the country with the highest salary increases in the Asia-Pacific (APAC) region, on the back of a similar outcome in 2014 and 2015.
“Interestingly, across APAC, while other countries (except China) reported the salary increases to be similar as the previous year, India is showing a slight dip,” the report said.
China saw its expected salary increase fall to 6.9 per cent in 2016, down from the 7.4 per cent seen in 2014. The report also notes that the 10 per cent level of salary increases in India looks to be the new normal looking ahead.
The sectors with the highest salary increases are startups, life sciences, media, hi-tech, and consumer products, with average salary increases ranging from 10.8 per cent to 15.6 per cent. The worst-performing sectors in this regard are cement, transportation, telecom, metal, and financial institutions.
Make in India
Interestingly, against the background of the current government’s Make in India manufacturing push, the report shows that most manufacturing industries are projecting a drop in their hiring in 2016, whereas all the sectors that are projecting an increase in hiring are services.
Within companies, the survey respondents said that they projected an above average salary increase for the manual workforce, clerical staff, junior management, and middle management, ranging between 10.3 per cent (middle management) and 10.8 per cent (clerical staff and junior management). They predict the senior management will receive lower than average salary hikes, but that probably has to do with the higher base they enjoy.
