Indian firms likely to give staff 10.3% pay hike in FY14

The hike is the lowest for the country in a decade except for the year 2009-10, says Aon Hewitt survey
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First Published: Wed, Feb 20 2013. 03 19 PM IST
The survey, conducted across 518 organizations in 20 industry segments, said the salary projection reflects the country’s uncertain economic outlook. Photo: Hemant Mishra/Mint
The survey, conducted across 518 organizations in 20 industry segments, said the salary projection reflects the country’s uncertain economic outlook. Photo: Hemant Mishra/Mint
Updated: Thu, Feb 21 2013. 10 46 AM IST
New Delhi: Indian companies are likely to give employees a 10.3% salary increase on average next fiscal year, better than in the US or China, but the lowest for the country in a decade except 2009-10, said a global survey by human resource firm Aon Hewitt that was released on Wednesday.
The survey, conducted across 518 companies in 20 industry segments, said the salary projection reflects the country’s uncertain economic outlook. India’s economic growth is estimated to slump to 5% in the current fiscal, the lowest in a decade, from 6.2% last year.
“Though business sentiment is strengthening on account of inflation reaching a three-year low and stock markets are rising, the cautious streak is evident in the projected salary increase numbers,” said Sandeep Chaudhary, partner (talent and rewards) at Aon Hewitt.
Those who perform better than their peers could get above-average raises as companies try to curb the attrition of key talent, which is a priority for them. Salary increases could exceed 14% for such people. This is in line with a trend in which companies, faced with shrinking salary budgets, are differentiating more sharply than before on pay increases between outperformers and the rest.
“In recent years, there is a shift in the way increments are managed in organizations,” Chaudhary said. “Companies are becoming discerning and they know the value of key talent. This year, the high potential, high performers are projected to get an average increase of 14.1%.”
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There is no one-size-fits-all retention incentive programme, said Ake Ayawongs, merger and acquisition business leader, growth markets (Asia, Middle East and Africa) at human resource firm Mercer.
A separate survey by Mercer on Wednesday said that for organizations engaged in mergers and acquisitions, retaining critical talent is top of the mind since it often directly impacts the overall success of deals. This reflects in higher compensation in terms of incentives and bonuses.
According to the Aon Hewitt salary survey, the overall attrition rate in India was 19.3% in 2012-13 compared with 15.4% in 2009-10, but the attrition rate among valued employees has come down to 5.6% from nearly 12% in 2009-10.
There is also a widening gap between salary increases for key personnel and other employees, said the survey. This is projected to widen to 35% in 2013-14 from 22% in 2010-11, Aon Hewitt said.
The study conducted in December 2012 and January 2013, however, said that salary increases for top management is inching downwards. In 2013-14, they are expected to get a 9.3% pay raise as against 14.9% in 2007-08. “The top management (salary) increases have fallen the most over last six years,” it said.
Aon Hewitt said pay raises of top or senior management have a direct correlation to company performance.
To be sure, in India, the salary differential between the top management and entry-level workers is wider at 822% than in China at 530% or in the US at 625%, Chaudhary said.
Among sectors, companies engaged in life sciences will lead in salary increases with a 13.1% hike; infrastructure is seen as the laggard at around 6.1%.
The pharmaceutical industry, a key segment of the life sciences sector, is a front runner in salary increases among all streams with a 13.5% projection for 2013-14. The sector is doing much better than the country’s economy with a three-year annual growth rate of 12.4% and a projected growth rate of 15.3%, the survey said.
Riding on the back of increasing demand and changing consumer preferences, the so-called fast-moving consumer goods (FMCG) sector comes second with a projection of a 12.3% hike in salary in the coming fiscal.
The financial industry is still in a recovery mode and pay hikes will vary across the various constituents of the industry. While the life insurance sector leads with 8.7%, the securities industry is seen giving a 6.6% salary increase. Banking employees are expected to get an 8% hike. The telecom industry, facing business and regulatory challenges, will lag behind with a projection of a 9.6% hike for 2013-14.
“Wage inflation will be a high pressure point for sectors where wage cost is a significant part of operating expenses and revenues. (In) sectors where wage cost is relatively a small-ticket item, the minimum fair pay increase will remain strong,” Chaudhary said.
Among countries, the average increase in remuneration is seen at 2.7% in the US, 9.3% in China, and 7.8% in Brazil and Russia. The 2013-14 projection for India is marginally lower than the 10.7% increase in 2012-13.
The survey said that unlike the crisis of 2009-10, a freeze on hiring and salaries is lower on the priority list of companies seeking to cut costs in the coming fiscal.
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First Published: Wed, Feb 20 2013. 03 19 PM IST
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