Even if you’re a top performer, don’t count on getting a big hike in pay this year; the days of 15 percent and 20 percent hikes in salary at Indian companies are gone. With the economic slowdown — worsened by Covid — leading to cost pressures, human resource managers are putting away plans for major hikes.
First, the good news. You won’t be denied a hike for the hard work you’ve put in so far in FY21 amid the lockdown and work-from-home (WFH) shift. But HR consultants caution that employees must not have unreasonable expectations.
“In 2018 or 2019, one could expect top performers to get 15-18 percent salary hikes. Those double-digit hikes are out of sight now and even the best employees will only get around 8-9 percent,” said Sahir A Aggarwal, a Bengaluru-based human resource consultant.
A survey by professional services firm Aon says India Inc is likely to offer a salary hike of 7.7 percent in 2021. The Salary Increase Survey showed that 88 percent of the companies surveyed reported that they intend to increase salaries in 2021. In 2020, the average hike given was 6.1 percent with 75 percent of the companies offering hikes.
But Nitin Sethi, partner and CEO of Aon’s performance and rewards business in India, said during the survey report’s launch that double-digit salary hikes are out of the picture for now.
The salary hike trend
From 2019 onwards, companies started getting cautious about salary hikes amidst a gradual slowing of the Indian economy. This was after GDP growth slowed to 5.8 percent in the January-March 2019 period compared to 8.1 percent a year earlier.
“Corporates started reducing their salary hike percentages from 2019 itself. From about 10.1 percent in 2018, this figure came down to an approximately 9.4 percent average hike in 2019. But the worst was witnessed in 2020 when Covid-19 forced average hikes to slip to 6 percent,” said Parikshit Tiwari, General Manager, RightEmploy HR Services.
Tiwari added that only sectors such as e-commerce and consumer technology were the outliers in 2019, offering hikes of 10.5-11 percent. But, he said, even these sectors kept costs under control in 2020 by offering average hikes of around 6.5 percent.
In 2021, too, the economic recovery is yet to fully begin. So, companies remain cautious.
The Finance Ministry’s Economic Survey for 2021-22 has projected GDP growth of 11 percent in FY22 after the historic GDP decline of 7.7 percent in FY21.
However, industry experts are of the view that companies are choosing to take a ‘wait-and-watch’ approach.
“The GDP forecast for FY22 is positive but that does not mean that the economy will bounce back immediately. Consumer spending is still far off the mark and States like Maharashtra and Kerala are seeing an increase in Covid-19 cases. Only once the country is fully vaccinated against Covid-19 will we see real signs of recovery. Till then, hikes of more than 9 percent would be unrealistic to expect,” said Sujata Dastidar, Senior Vice President at Gems Career Services, a Kolkata-based HR firm.
Is there a revival on the horizon?
The expectation is that India will take two years to fully vaccinate all its citizens against Covid-19. New strains of the virus are also being discovered in countries such as the UK and South Africa.
Against this backdrop, consultants are of the view that a double-digit salary hike is not possible before 2024.
“Some sectors like IT, consumer technology and e-commerce could be outliers and offer hikes of 10-12 percent from mid-2022 onwards. But that is also subject to the possibility of a complete revival in spending and all pay cuts being revoked,” said Samuel Varghese, an HR consultant from Chennai.
Varghese added that since 10 million Indians are still unemployed
owing to Covid-19 and its impact on the economy, the real revival would also depend on these individuals finding alternate sources of livelihood.