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Double-digit salary hikes on the horizon, but pay gap may widen

Double-digit salary hikes on the horizon, but pay gap may widen
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First Published: Tue, Mar 08 2011. 11 04 PM IST
Updated: Tue, Mar 08 2011. 11 05 PM IST
New Delhi: Corporate employees can expect a second year of double-digit salary growth in 2011 as the impact of the global economic crisis of 2009 fades. However, there will be a wide gap between pay hikes for top and average performers.
Global human resources (HR) consulting and outsourcing firm Aon Hewitt said in its 15th annual salary survey of companies that average pay increases in 2011 are expected to be 12.9%, up from 11.7% in 2010, 6.6% in 2009 and 13.3% in 2008.
Also See Talent Pays (PDF)
Indian corporate salaries are usually determined by factors such as employee performance, performance of his employer, the budget available, specialist skills required by the organization and what similar companies are paying. “However, for the first time employers in India have also considered the impact of inflation in determining employee salaries. In developed countries in the West, rate of inflation in the market has consistently been factored into salary increases,” said Nitin Sethi, India Practice Leader, Broad Based Compensation at Aon Hewitt India.
Inflation in India accelerated in 2010 though corporate salaries have more than made up for the diminishing purchasing power of money over the past two years. Average inflation in wholesale prices was 2.1% in 2009 and 9.5% in 2010.
The 531 companies surveyed included small, mid and large sized companies, from the private and public sector as well as privately held companies and family businesses. Sethi added that large companies were not necessarily paying larger increases and small companies less. The Aon Hewitt survey shows highest expected salary increases for 2011 in engineering services at 14.4% followed by automotive and energy at 14% each.
Top, middle, junior and entry level salaries were surveyed. Salary increase at the junior level, for two to seven years experience, is expected to be the highest across levels at 13.3%. Salary increases for top executives is expected at 12.1%, middle level at 12.9% and workmen compensation is expected to increase at 11.7%. “The greatest amount of pull and pressure happens at the junior level. Also supply has not been increasing by leaps and bounds. For instance the supply of engineering graduates has been around 450,000 per year over the years,” said Sethi.
According to Aon Hewitt, salary increases in corporate India has been the highest compared with other free market economies and also within the Asia-Pacific region. In the Western economies, typical salary increases are in the range of 2% to 4%, said Sethi.
Aon Hewitt expects salary hikes of between 12% and 15% over the next two to five years. Whereas five years ago, technology was the growth sector, sunrise sectors now include healthcare, education and infrastructure. India needs $1 trillion (Rs.45 trillion) of investment in infrastructure in the next 10 to 12 years.
The study also observed that companies are paying more for top talent as attrition levels have moved up to 18.9% on average, up from 12% to 14% last year. Organizations cannot afford to lose top performers.
Increments for top performers in India Inc. are expected at 17.8% versus average performers at 10.5%.
“Talent acquisition, retention and growth is what drives salary levels and pan industry one is seeing a lot of talent acquisition and concomitantly an increase in compensation and benefit levels. Attrition has been on the rise and therefore too companies have had to be more competitive on compensation,” said Hema Ravichandar, a strategic human resources consultant and a former head of HR at Infosys Technologies Ltd.
malvika.c@livemint.com
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First Published: Tue, Mar 08 2011. 11 04 PM IST
More Topics: India | Economy | Wages | Aon Hewitt | Corporate News |