India Inc projected to offer 9.9% pay hike in 2022; attrition rate at two decades high

Indian employees may get an average pay hike of 9.9% in 2022, a six year high as business optimism grows and companies make efforts to retain talent amid stiff competition.

The projected increment is the highest since 2016 when the average raise was 10.2%, consulting firm Aon said in its India Salary Increase Survey of around 1,500 companies. In 2021, the average pay hike was 9.3%.

After seven years of double-digit hikes, average increment in India fell to 9.3% in 2017, and 9.5%, 9.3%, 6.1% and 9.3% in 2018, 2019, 2020, and 2021.

While the average hike is projected to be 9.9% in 2022, top performers will get 1.7 times more salary increment in 2022, Aon said in its annual findings released on February 16 ahead of the appraisal season for corporate employees.

The industries with the highest projected salary increases are e-commerce and venture capital, hi-tech/IT, professional services, and life sciences. While e-commerce is projected to pay 12.4 percent pay hike in 2022, high tech sector is set to pay 11.6 percent hike, followed by professional services (10.9 percent) and IT enabled services (10.7 percent).

The trend report also showed that the impact of great resignation was felt  well in 2021 with attrition numbers touching a two decade high.

In contrast, sectors like metal and mining (8.3 percent), restaurant (8.5 percent) and cement (8.6 percent) are set to give relatively low pay hikes. However, salaries are growing across sectors compared with 2021.

This appraisal season is also set to see more companies offering double-digit hikes – while 32.3% firms are projected to offer over 10% hike this appraisal season versus 27.5% last year. Similarly, almost 46% of companies are set to give 8 to 10 percent pay hike this year as against 38.6 percent of companies last year.

“Salary increases should come as a welcome break for employees amidst a volatile period. For employers, it could emerge as a double-edged sword when you combine the rising cost of talent with record-high attrition numbers. This trend is fuelled by economic recovery and the need for organisations to invest in new age capabilities to build a resilient workforce,” said Nitin Sethi, partner and CEO of Aon’s human capital solutions in India.

The survey said the business optimism has grown significantly  in 2022. It said 88 percent of the organizations foresee an improvement in business outlook in 2022, a 11 percentage point higher than 2021.

The survey, which is now running for 26 years, also showed that Indian companies will pay a much higher than their global peers. For exmaple, while Chinese firms are projected to offer 6 percent pay hike, it is 6.1 percent in Russia, 5 percent in Brazil, and 3.6 percent in the US.

Of course, the survey also underlines that the inflation projection too is highest in India as against several other countries.

Attrition rate:

The attrition rate observed by Indian companies has sky rocketed. The Aon survey showed that the 21% attrition recorded in 2021 is highest at least since 2003.

"Great Resignation impact was felt with attrition numbers highest in two decades. While the  overall attrition stands at 21%, the voluntary attrition rate was 15.4%," the anual salary trend report showed.

Voluntary attrition is a sub set of the overall attrition, and shows the willingness of the workforce to shift jobs as competition for talent has increased at least in some of the sectors in the past six to eight months.

The 2021 attrition rate stands way higher than the 12.8% rate observed in 2020 when Indian economy faced a difficult phase due to the Covid-19 pandemic outbreak, and the ensuing national lockdown. The 2020 also witnessed a massive job cut in both formal and informal sectors as the economic growth faltered, health crisis intensified, and job loss and income loss led to fall in consumption in the country.