Exclusive: Location based salary restructuring unlikely this year, India Inc to hike HR budget to curb attrition

India Inc is unlikely to lower pay for those working from home this year, choosing instead to bump up compensations and human resources budgets as it seeks to stem talent loss amid high attrition.

Staffing firms, headhunters, and industry experts said that corporates, especially in the white collar space, have put location-based salary restructuring plans on the back burner as 2022 looks to be the year of the employee.

“You will not see city-based compensation restructuring in 2022. The compensation budget will be higher this year, and retention of talent is a key focus area,” said Anandorup Ghosh, partner (human capital) at consulting firm Deloitte.

“Talent demand will continue to grow in the high tech and high skill spaces, and companies will bump up compensation in 2022 for sure,” Ghosh added.

Kamal Karanth, co-founder of specialist staffing firm Xpheno, said talk around differential pay structure based on location had started from the US before spreading to others.

“While some were debating the need for it in India, it has been put on the back burner. 2022 is going to be an employee premium year at least in key sectors. And companies will hike compensation and adopt other measures to retain as well as tap talents,” he added.

In a fiercely competitive market, reducing or restructuring the salary will likely lead to attrition, Karanth explained.

There are other goodies awaiting employees as Rajul Mathur, consulting head India (talent and rewards) at Willis Towers Watson, expects “adoption of one-time bonus pay-outs, short-term quick fixes like strong joining and retention pay-outs to manage the immediate impact of the Great Attraction”.

“We expect the prevalence of segmented and customised total rewards programmes to maximise total rewards budgets. Criticality-based compensation premiums would be delivered,” Mathur added.

India is witnessing high attrition in some service sectors, especially technology and technology-enabled ones. Leading infotech (IT) firms have witnessed higher attrition rates in the past two quarters.

For example, Infosys reported an attrition rate of 25 percent in the October-December quarter and has underlined a three-pronged strategy to fight this -- a cycle of promotions, competitive rewards and compensation, and reskilling of employees.

Sectoral compensation

"We had projected a median compensation increase of 9.3% in 2022 (across sectors)," said Mathur of Willis Towers Watson.

“Sectors like high tech, shared service centres and consumer products are expected to outperform others. Having said so, digital talent and people specialised in marketing are expected to attract huge premiums across industry segments,” he said.

Karanth said, along with the mainstream IT sector, all internet-facing businesses – fintech, edtech, healthtech, e-commerce – will continue to hire more talent and offer good compensation this appraisal season and beyond.

“But one must understand that even though sectors like IT, consumer goods and e-commerce are hiring in good numbers, we have muted demand in several others like manufacturing and hospitality," Ghosh of Deloitte pointed out.