India Inc's salary hikes in 2017 are projected to be at a eight-year low. According to a survey by Aon Hewitt, the average pay hikes will be 9.5 percent across industries. It was 10.2 percent in 2016.
The lowest projected hike was 6.6 percent in 2009 during the global financial crisis.
Anandorup Ghose, Partner at Aon Hewitt India told Moneycontrol that this drop is on the back of slower economic growth, low gross domestic product (GDP) forecast as well as global turmoil including Brexit and US President Donald Trump's visa tightening moves that could impact Indian companies.
However, he added that unlike the period of financial crisis in 2009, companies will not take any knee-jerk reactions with respect to staff costs.
While traditionally pay increases in India have not been affected by inflation rates, the survey said that the significant drop in Consumer Price Index (CPI) over the last few quarters has also been a good opportunity for companies to manage their compensation budgets.
With tighter budgets, it has become imperative for firms to ensure that their ‘top talent’ is identified and remunerated accordingly. Research shows that the segment of population that features as ‘high performers’ have fallen to 7.5 percent, the lowest number recorded in the 21 years of the Salary Increase Survey in India.
Consequently, the multiplier that India Inc is offering these employees continues to be high. At 1.8 times, India is one of the highest differentiators across Asia.
Ghose said that companies continue to invest in high performers and that it is primarily the average performers that will be impacted by the lower hikes.
He added that even sectors like consumer internet companies which had seen 15.5 percent hike last year will see a much lower hike of 12.4 percent in 2017.
According to the survey, lowest hikes will be seen in the cement sector at 7.6 percent. Ghose said there is also a dearth of new forms of talent adaptive to the changing needs. Sectors like media and entertainment which have a lot of growth in these adaptive and skilled talent are projected to have a 10.3 percent in 2016, he added.
The attrition rate in India was similar to 2015 at 16.4 percent. While attrition was contained at a broader level, key talent attrition increased from 7.3 percent in 2015 to 12.3 percent in 2016.
While inequity of pay remains a concern, the key reasons cited by employees for voluntary attrition are role stagnation and limited growth opportunities, the survey said.Salary hikes: A 10 year view
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