Home / News / India /  Indian firms may offer 9.1% pay hike, lowest in decade

NEW DELHI : India Inc. is projected to offer an average pay hike of 9.1% to their employees in 2020, the lowest since 2009, as companies seek to tighten their purse strings amid a tough economic environment, the Aon Annual Salary Increase Survey showed on Tuesday.

In the last appraisal season, the average pay hike was 9.3%. Barring 2009, when Indian companies witnessed an average 6.6% hike in the wake of the global economic meltdown, the 2020 figure will be the lowest in 20 years, according to the survey by Aon, a leading human resource and consulting firm.

Graphic: Paras Jain/Mint
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Graphic: Paras Jain/Mint

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The study, one of the most comprehensive of its kind in India, analysed data of more than 1,000 firms from across 20 sectors. The findings reflect the economic environment in the country. India’s economy grew at a six-year low of 4.5% in the September quarter.

In December, the Reserve Bank of India slashed the economy growth outlook for 2019-20 from 6.1% earlier to 5%. The Centre for Monitoring Indian Economy reported a 9.7% urban unemployment rate in January 2020 amid reports that companies have reduced their headcount in 2019-20.

The survey also showed that the attrition rate among Indian employees bumped up a bit from 15.8% in 2018 to 16.1% in 2019, aided by growth in involuntary attrition or layoffs.

The economic growth of a country has a direct bearing on salary growth, said Navneet Rattan, director, performance and rewards, Aon India. “Before 2011, salary growth was in the range of 12-15%. However, in the last few years, it is showing high single-digit growth. We have to see this in conjunction with the gross domestic product growth of India," he said.

Startups, e-commerce platforms, professional services, and the pharma sectors will be the top paymasters in 2020, while logistics, infra, auto, and hospitality are expected to witness the lowest average pay hike, according to the survey.

Startups, e-commerce platforms and professional services are expected to offer an average hike of 10%, while pharma and IT companies will offer 9.9% and 9.6%, respectively. The logistics and transport sector with a projected pay hike of 7.6% will be at the bottom of the pay ladder this year, closely followed by hospitality (8.2%) and infrastructure (8.3%). The automotive industry will see the biggest drop—from 10.1% in 2018 to 8.3% in 2020, the survey showed.

“Companies in India gave an average pay increase of 9.3% during 2019, reflecting a slowdown in the economy compared to 2018. The projection for 2020 is down by 20 basis points to 9.1%. However, despite the dip in the projections, two out of five participating companies in the survey are projecting a double-digit increase, expecting a positive economic outlook," the survey underlined.

Yet, India Inc. will offer a better pay hike than its Asian peers, said Aon. Chinese companies are expected to offer a 6.3% hike, the Philippines 5.8%, Malaysia 5.3%, Singapore 3.8%, Australia 3.1% and Japan 2.4%.

“Despite economic challenges in 2019, organizations in India are taking a positive view. Pay increases in India continue to be the highest in the region. A big reason for India’s higher salary increase, as compared to other growing economies, is the high inflation rate and the war for key talent and niche skills," said Tzeitel Fernandes, partner, rewards solutions, Aon.

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