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In India, among sectors, e-commerce and start-ups will offer the best average salary hike (15.6%) and financial institutions the lowest at 8.8%. Photo: Pradeep Gaur/Mint
In India, among sectors, e-commerce and start-ups will offer the best average salary hike (15.6%) and financial institutions the lowest at 8.8%. Photo: Pradeep Gaur/Mint

Indian firms may offer 10.3% average pay hike in 2016

The business outlook in India has dipped a bit, and is reflected in the projection, says Aon Hewitt's India Salary Increase Survey

New Delhi: Indian companies are expected to offer an average salary hike of 10.3% to their executives in 2016, a tad lower than the 10.4% increase last year, as employers wait for the business environment to improve, consulting firm Aon Hewitt said on Wednesday.

Aon Hewitt’s India Salary Increase Survey, which is a pointer to the upcoming job appraisals season for white-collar employees, said the business sentiment in India has dipped, and is reflected in the modest projection.

“Companies across industries are continuing to take a cautious stance and are not going for aggressive pay increases," the survey said.

In the last five years, the average salary hike has been range-bound -- in the vicinity of 10.5% -- and “this seems to be the new normal," said Anandorup Ghose, head of the talent and reward vertical at Aon Services India Pvt Ltd.

He said employers were seeking to rein in compensation costs until the business environment rebounds.

Among sectors, e-commerce and technology driven start-ups will offer the best average salary hike (15.6%) and financial institutions the lowest at 8.8%, said the survey.

Life sciences (11.6%) and media (11.2%) are expected to be among the sectors offering the best pay raises in 2016.

“There is a pull factor (for employees) in terms of the service sector and that’s why service sector companies have largely projected a better payout than last year. But this is not the case for manufacturing sector companies," Ghose said.

He said e-commerce and early-stage start-up companies were projected to offer nearly 1.6 percentage points more in average salary in 2016 and media 0.7 percentage point more than what they actually offered last year.

The survey, which covered 700 Indian companies in December and January, said the whole discussion around pay increases was becoming far more nuanced that it used to be.

“From being a large budget being equally distributed across populations, now a small budget is being more sharply distributed. This is perhaps the emergence of a new normal," the survey said.

It means, top performers will get better salary hikes than others. “With increased pressure on margins and limited budgets, organisations are accelerating the pay for performance," the survey said, adding that in 2016 the key talent pool of organisations will get 1.8 times the average salary hike.

Though the average salary hike has been stagnating, India continues to offer the best hikes in the Asia pacific region, Ghose said.

In the Asia Pacific, among others, Chinese employers are expected to offer an average pay increase of 6.9% and Japan 2.5%, the lowest in the region. India’s average is also highest in BRICS (Brazil, Russia, India, China and South Africa) grouping.

Factors including concerns about Chinese and European economies and slumping oil prices have cast a cloud over global business sentiment, said Amit Khurana, managing director of human resource company Corporate Access.

“India is no different - the 2014 feel good factor has ebbed and the reality is in front of us. In this scenario, some companies will take advantage and reduce employee cost," Khurana added.

Khurana said higher-up employees in organisations will feel the heat the most and the entry level the least.

The Aon Hewitt survey forecast that junior employees will get an average hike of 10.8% in 2016 compared with 10.7% the previous year; at the top level, the hike will average 9.5%, a bit lower than last year’s 9.7%.

The survey also said that due to the current realities in businesses, the average attrition rate has gone down - from 20% plus five years back to 16.3% now.

“Attrition levels are at their lowest in recent history. Not only are firms not hiring in a rampant manner (many choose to not refill vacant positions), employees themselves are far more cautious before changing jobs," the survey said.

Across the globe, Venezuela may offer the best salary hike in 2016 -- 49.9%, followed by Argentina (30.3%), Malawi (13.3%) and India and Ghana (both 10.3%).

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