By Rajeshwari Sharma
It pays to be in India. Salaries of Indian employees increased by between 11.9% and 16% in 2006 over the previous year and this was the highest increase not only in the Asia Pacific region, but globally.
In Asia-Pacific, the second-highest increase in salaries was in China (8.3%).
And this year, companies across sectors such as fast-moving consumer goods (FMCG), information technology (IT) and IT-enabled services, and banking and financial services are likely to pay their employees around 14.5% more, making 2007 the fourth consecutive year in which salaries grew by double digits.
These findings are part of the 11th annual salary survey conducted by Hewitt Associates, a HR consulting firm. In 2006, the survey said Indian companies beat their multi-national counterparts in rewarding their employees (14.9% compared with 14.3%).
“This is largely due to the fact Indian companies are increasingly aligning their compensation structure to global standards to attract and retain talent, and to enhance overall productivity,” said Sharad Vishvanath, business leader of Hewitt’s Talent and Organizing Consulting Analytics practice in India.
The rise in salaries is attributed to a global war for talent. “Compensation is playing an increasingly significant role in attracting talent; salary is amongst the top-three drivers, the other two being career growth and development,” said Vishvanath. According to the survey, almost all the respondents (99.6% of 559 participating organizations) had a performance management system and 99.5% of them linked salary increases to performance rating. In contrast, in 2001, only 84% of the respondents had linked salary increases to performance rating. In the Asia-Pacific region, performance ranked first and age, last in terms of the factors influencing the pay decisions.
“Indian companies have become fastidious in terms of performance,” said Sandeep Chaudhary, business leader, talent and organizing consulting analytics practice at Hewitt. “It’s more about individual performance than factors like seniority or experience. In China, seniority still plays a decisive role,” he added.
The study also highlights that variable pay continues to be an important means of attracting and retaining talent. Of all the participants, 87% had a variable pay plan in place and the average variable pay component was 16.5% of the total compensation.
The increase in salaries isn’t extraordinary, said some HR managers. “The overall salary increase is not that dramatic but the upsurge in demand for people surely is. Of course, on a case-to-case basis, we are seeing crazy salary jumps, in multiples of 2 to 2.5,” said Piyush Mehta, senior vice-president, human resources, Genpact.
Mehta added that no company could only play the salary game and hope to succeed. “What will help retain employees are other equally important factors like job profile, training and learning opportunities, and career development,” he added.
The survey points out that over the past seven years, the professional/supervisor/technical level, which comprises people with less than seven years of experience, has received the highest salary increase unlike the late 1990s when the senior/top management enjoyed the highest salary increase.
Around 64% of the polled companies offered long-term incentives, out of which 68% said stock options were their favoured plan.