Smaller salary hikes in 2016, but it’ll feel like more

Slowing inflation may put more money in the hands of Indian salary earners, according to a Korn Ferry Hay Group report

Photo: Priyanka Parashar/Mint
Photo: Priyanka Parashar/Mint

Bengaluru: Indian employees can expect their real incomes (salaries less inflation) to rise by 4.7% in 2016—the highest increase in three years—as slowing inflation puts more money in the hands of salary earners, consulting firm Korn Ferry Hay Group said on Wednesday.

For 2016, the expected average raise is 10.3%, marginally less than that in 2015, 10.5%. After taking into account inflation rates, Indian employees are likely to earn a real wage increase of 4.7% compared with 2.1% in 2015 and only 0.2% in 2014, according to a report released by Korn Ferry Hay.

In India, the average retail inflation as measured by Consumer Price Index (CPI) was an average 7.1% in calendar year 2014 and 4.8% in 2015 (January-October), according to the Central Statistics Office. The Korn Ferry Hay report forecasts that inflation will be around 5.6% in 2016. The Reserve Bank of India has set a target to lower inflation to 6% by January 2016 and 5% by March 2017.

Globally too, the average real salary increase is expected to be 2.5%, also the highest in three years, as pay increases combine with historically low inflation to leave employees better off.

Even though India is ahead of the global average, it lags behind China when it comes to real wage increases. At 8%, China’s salary forecast is lower than India’s, but after accounting for inflation, the Chinese can expect a real wage hike of 6.3% for 2016.

The report suggested that the 10.3% average expected raise in India is significant.

“In emerging economies, up-skilling workers is crucial for companies to maintain competitive advantage and those skilled employees can expect to see wages rise as talent shortages in certain regions drives salaries up,” said Philip Spriet, global managing director for “productized services” at Hay Group.

“The highest salary growth predicted in Asia is not surprising, given the war for talent in the region. Companies are more focused than ever before on flexibility. They are willing to customise their strategies, even in link with rewards. The effort to retain talent can be directly linked to this,” said Amer Haleem, business manager, productized services, Hay Group India.

In countries such as Ukraine and Venezuela, political turmoil and high inflation have led to real wage decreases of 36.8% and 52.6%, respectively. Among the BRIC (Brazil, Russia, India, China) nations, Russia is expected to see a real wage fall of 7.5%.

The data for this report was drawn from Hay Group PayNet which contains data for more than 20 million job holders in 24,000 organizations across more than 110 countries.