Firms may give an average 10% pay hike
PremiumSalaried employees are set to get the biggest pay raises in six years, with Indian companies grappling with a talent exodus amid a hot job market and high inflation. And, unsurprisingly, tech, e-commerce and life sciences workers will reap the biggest gains this year
MUMBAI : Salaried employees are set to get the biggest pay raises in six years, with Indian companies grappling with a talent exodus amid a hot job market and high inflation. And, unsurprisingly, tech, e-commerce and life sciences workers will reap the biggest gains this year.
Surveys by human resource consultants showed companies would raise salaries by an average of 10% in 2022, also boosted by the improving business outlook as the pandemic recedes.
Consulting firm Aon expects firms to roll out an average 9.9% increment, while rival Mercer said technology talent would command a premium in the job market. Candidates with a tech background will have options across sectors as companies adopt artificial intelligence, machine learning and cloud-based solutions.
“Salary increases should come as a welcome break for employees. But, for employers, it could emerge as a double-edged sword when you combine the rising cost of talent with record-high attrition numbers," said Nitin Sethi, partner and chief executive of Aon’s Human Capital Solutions in India, on Wednesday.
According to Aon’s Annual Salary Increase Survey, the 9.9% wage growth comes after a 9.3% hike in 2021. For those employed in the technology, e-commerce and other services industries, 2022 promises particularly big payouts as companies struggle to retain staff. Demand for people with software, cloud computing, cybersecurity and data analytics skills has shot up in the post-pandemic era as companies digitize their operations to reach consumers, creating a tight labour market.
India Inc. has recorded its highest employee turnover in a decade at 21%. More than half of this is voluntary attrition. This, experts said, indicates that the war for talent will not abate soon.
The services sector expects to offer a 10.6% average salary increase, compared to 9.2% for the manufacturing sector. While 65% of manufacturing firms indicated attrition rates of over 20%, this figure rose to a staggering 71% for the services sector.
Mercer’s Total Remuneration Survey, also released on Wednesday, noted that some sectors would go beyond its estimated average of 9% for 2022. They include firms in the consumer, life sciences and technology areas.
“A key positive is that organizations across the board are reverting to pre-pandemic levels of investment in rewards, expected to be at about 9% for all industries in 2022, compared to 7.7% in 2020, signalling positive economic and business sentiment," said Mansee Singhal, senior principal, rewards consulting leader for Mercer India.
However, retaining staff will remain the biggest challenge. Besides the increase in monetary compensation, the number of employees being rated in the top two performance segments—‘far exceeding expectation’ and ‘often exceeds expectation’ has gone up.
“We are seeing 36% of people in the top two categories compared to 30% or less in the past. That’s a significant increase. The other thing we are noticing is how firms are protecting their top talent, especially with 2022 expected to be a growth year," said Jang Bahadur Singh, senior consultant, human capital solutions, Aon.
Organizations are aggressively differentiating top performers from the rest and trying to make them feel special with a salary increase of up to 1.7 times more than what firms would have offered in a regular year. “What was surprising was the extent of the convergence that’s happening for deep tech roles even in non-traditional tech firms. They are also talking about the top five or six tech skills like data analytics, AI, etc."
Mercer noted differences in salary hikes between designations within the same industry. While a para-professional in the consumer sector commanded a premium of 3.2%, an executive commanded a premium of 10.7% compared to general industries. On the other hand, a management-level employee in the manufacturing sector commanded a premium of 10.2%, while an executive in the sector is witnessing lower than the level median pay. Specialists in tech-based profiles like software development, data sciences and research commanded premium salaries. While Bengaluru remained the tech hub, Mercer noted that mushrooming of internet and e-commerce companies in Delhi and Mumbai is leading to salary spikes for similar roles.
Meanwhile, India continues to have a higher pay hike projection in comparison to BRIC nations and developed economies.For example, against the nearly 10% projection in India, the pay hike is likely to be 5% in Brazil, 6.1% in Russia, and 6% in China after offsetting inflation, the Aon said.
