Expect less generous raises, fewer hirings in 2009: Mercer

New Delhi: Salaries for executives in India in 2009 will likely stay at 2008 levels or increase marginally, according to a survey released on Thursday, as the economy slows and companies mull cost-cutting measures, including selective layoffs.

According to the survey on compensation and hiring plans, conducted by US human resource consulting firm Mercer Llc., at least 80% of the companies surveyed in India expect to do worse in 2009 than they did in 2008.

And while a majority aren’t laying off people, they also aren’t planning to hire in strength. Nearly two-third of the companies surveyed here said they were unlikely to significant reduce headcount.

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However, only one out of four companies surveyed will continue recruiting at or above replacement levels, which means that most companies will only hire replacements.

The survey, called Leading Through Unprecedented Times, was conducted between 3 and 14 November; Mercer interviewed around 1,000 human resource and finance executives across the world including 100 from India.

Mercer’s India head termed the coming freeze as a correction.

“India grew on the back of knowledge and people-centric industries such as financial services, information technology, and retail, among others. However, a talent crunch led to spiralling employee costs since 2003 and companies have been under severe strain,” said Padma Ravichandar, country leader, Mercer Consulting India. “This current situation should be perceived as a cooling down period in terms of talent costs.”

With the economic environment rapidly deteriorating since September, around 36% of the respondents in India said they had had to downscale hiring plans.

“Companies are definitely indicating a deferment in hiring plans for some key positions and we are receiving such communications,” said E. Balaji, chief executive officer of Chennai-based Ma Foi Management Consultants Ltd, a search firm.

K. Raghavendra, vice-president and head, human resources, Infosys BPO Ltd, said the company is likely to add fewer people in key roles in 2009.

The survey also showed that companies are planning to go easy on increments next year. Around 83% of the companies surveyed said salary increases in 2009 are likely to be lower than those originally planned. Around 19% of respondents said that they were likely to consider freezing 2009 salaries at 2008 levels.

Sanjay Jog, chief people officer, Future Group, said salary hikes in 2009 would be minimal for his group’s employees. “We will only take a call in March, three months before our increments happen in the beginning of our financial year, July.”

“Average salary increments in 2009 are expected to hover around 8-10% against an average pay hike of 15-20% in 2007,” added Balaji.

Almost half the Indian companies surveyed said they expected bonus payouts in 2009, for performance in 2008 to be lower than budgeted or planned.

Graphics by Ahmed Raza Khan / Mint