Corporate India handed over an average increment of 8 percent in 2021, and early estimates reveal that average increment for 2022 is expected to increase to 8.6 percent in line with a healing economy and improving confidence, according to a Deloitte survey.
As per the second phase of Deloitte's Workforce and Increment Trends survey 2021, 92 percent companies gave an increment in 2021 at an average of 8 percent, compared with only 4.4 percent in 2020, where just 60 percent companies had extended a pay hike.
For 2022, average increment is expected to increase to 8.6 percent, at par with the pre-pandemic levels of 2019, the survey said, adding that about 25 percent companies surveyed have projected a double-digit increment for 2022.
The 2021 Workforce and Increment Trends survey was launched in July 2021. The primary audience for this survey were seasoned HR professionals. More than 450 organisations participated in this edition spread across seven sectors and 24 sub-sectors.
The survey further said that organisations will continue to differentiate pay increases by skills and performance and top performers can expect about 1.8 times the increments given to average performers.
"While most companies are projecting a higher increment in 2022 compared to 2021, we continue to operate in an environment where COVID-19 related uncertainty persists, making it harder for companies to forecast. Some of the survey respondents have also just closed their 2021 increment cycle so 2022 increments are a fair distance away for them," Anandorup Ghose, partner, Deloitte Touche Tohmatsu India LLP said.
Moreover, "GDP forecasts for FY 2021-22 were revised down after the second wave and we expect organisations to closely watch similar developments while managing their fixed cost increases next year," Ghose noted.
The survey indicates that in 2022, the information technology (IT) sector is likely to offer the highest increments, followed by the life sciences sector.
IT is the only sector that is expected to extend double-digit increments with some digital/e-commerce companies planning to give some of the highest increments.
Retail, hospitality, restaurants, infrastructure, and real estate companies continue to project some of the lowest increments in line with their business dynamics.
"It is heartening to see most companies extending increments in 2021 even in sectors which have not fully recovered yet. Going forward, function specific increment differentiation may become more prevalent as attrition rates vary significantly across different skills," Anubhav Gupta, partner, Deloitte Touche Tohmatsu India LLP, said.
Gupta further noted that "compensation is usually one of the top reasons for attrition, particularly at a junior management level, where virtual hiring has made it easier to jump ships."
The survey further noted that approximately 12 percent employees were promoted in 2021, as compared to 10 percent in 2020. Almost 12 percent companies have updated their bonus or variable pay plans to align their rewards structures with the changing priorities.
With respect to hiring, 78 percent companies stated that they have started recruiting at the same pace as they used to prior to COVID-19.
About 60 percent organisations updated their health insurance policy due to COVID-19 and 24 percent organisations readjusted their life insurance policy. Besides, almost two out of every three organisations readjusted their leave policy and introduced special leaves of 14 to 21 days, over and above the regular annual paid leaves.
As far as return to office is concerned, only 25 percent companies have conducted an employee preference survey to decide their return to work strategy.
In most cases where such a survey was conducted, employees seem to prefer a hybrid work arrangement (combination of work from home and office, wherever feasible). However, at an all India level, only 40 percent organisations have finalised their return to work strategy.
"Previously, the organisations used to decide who can work from home; they are now deciding who can / should work from the office.
“While the hybrid model seems to be the preferred choice, there are critical questions around employees’ health and safety, flexibility and choice, governance, data security, business continuity, collaboration, team work, and culture that need to be carefully thought through before finalising a robust return to work strategy," Ghose added.