India Inc to offer average pay hikes of 10% in 2017; IT guarded

The companies surveyed by these HR firms are optimistic with respect to 2017 not just from an appraisal perspective but also from adding newer talent.The appraisal cycle usually begins in March of every year. However, for sectors like IT, employee assessments happen twice a year.

As per Mercer’s India Total Remuneration Survey released today, organizations are expecting to increase salaries by 10 percent across industries and career levels in 2017, and 54 percent of these companies are expecting to increase their headcount.

“Over the years, salary increase differentiation across industries has narrowed down. Over the last 3 years, salary increases have stabilized around 10 percent. We also note that the overall increases including promotions and market corrections, are pegged at 10.8 percent,” according to Ruchika Pal, Principal & India TRS Product Leader, Mercer.

Over a five-year period, real wage growth has however been steadily rising, on account of reduced inflation, thereby indicating real wage increase for employees and increasing real wage costs for employers. 

“Against the backdrop of increased demand for talent and high attrition rates, the majority of companies use inflation rate as the basic minimum level to peg their salary increases and engage their employees. The increase in real wages reflects the acute talent demand supply mismatch,” added Pal. 

Compared to last year, there could be a marginal correction. According to new research by the Hay Group division of Korn Ferry, employees in India can expect pay increases on the order of 10.3 percent or thereabouts, across job roles in 2017. The percentage amount represents a slight increase against an actual average salary increase of 10.1 percent across India Inc. in 2016.

The annual report breaks down jobs into four levels – Clerical & Operational, Supervisory & Junior Professionals, Middle Management & Seasoned Professionals, and Senior Management & Executives. While the expected increase at Middle and Clerical & Operations levels stands at 10.2 percent and 10.4 percent, respectively, the percentages for Senior and Supervisory levels are expected to be 10.3 percent. Across all four employee levels, the increments range between 10-10.5 percent.

Amer Haleem, Country Manager, Productized Services, Hay Group said that companies are now making a sharp differentiation between high, average and low performers.

“The increment grids have a broader range spread, which directly brings the focus on the differentiation in rewards, for different levels of performance. Variable pay plans for many organizations have been modified to lay emphasis on organisation performance,” added Haleem.

However, while IT has slowed down, industry experts said that it is not bad for other segments. Demonetisation has played havoc with sectors like real estate, textile, FMCG and media; however these are expected to bounce back in the next two quarters.

Sunil Goel, Managing Director, GlobalHunt said, that for some of the companies (especially in sectors like IT), salaries still constitute 60-70 percent of the total operating costs.

“But this does not mean that the entire market has slowed down. Shared services centres are also continuing to be built in India. Increase for senior management will be dependent on company performance in the last two to four quarters and not industry parameters,” he said further.

Overall, companies are also bringing in newer appraisal cycles and moving away from the traditional bell curve model. This, too, said HR experts, will make hikes on par with global standards.