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Salary increment projected at 7.3% this year

Since the IL&FS defaults, it can be noted that NBFCs and housing finance companies (HFCs) were facing a crisis of confidence, sending call money rates higher and overall liquidity tight.Premium
Since the IL&FS defaults, it can be noted that NBFCs and housing finance companies (HFCs) were facing a crisis of confidence, sending call money rates higher and overall liquidity tight.

  • About 20% companies are planning to give double-digit increments, compared to 12% last year. And while the increment numbers look better than last year, it’s still lower than the 2019 average, which stood at 8.6%

Over 90% of organisations in India plan to give an increment averaging about 7.3% this year, according to a survey by Deloitte Touche Tohmatsu India LLP (DTTILLP). The projected increment is an increase from 4.4% in 2020, which was given out by 60% of companies. This, however, won’t have much impact on senior or top management employees, where the average increment is forecast at 6%.

The study findings from the phase 1 of the 2021 Workforce and Increment Trends Survey by DTTILLP was based on responses from 400 organisations across seven sectors and 25 sub-sectors.

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About 20% companies, the report said, are looking at handing out double-digit increments. Sector-wise, life sciences lead the highest projected increment payout of 9.2%, followed by IT (8.6%) and consumer products (7.6%). The lowest, according to the findings, is the services sector (5.9%), which was hit the hardest by covid-19. Other sectors where hikes are expected to be poor include real estate, infrastructure, and renewable energy companies.

While the increment numbers look better than last year, it’s still lower than the 2019 average, which stood at 8.6%.

"Covid-19 has made year-on-year analysis tricky as 2020 has been an anomaly, making 2019 a better year for comparison. Average India 2021 increment of 7.3% is still considerably lower than 8.6% in 2019. While business activity is rebounding quickly, organisations are managing compensation budgets responsibly considering their affordability and sustainability of fixed cost increases," said Anandorup Ghose, partner at DTTILLP.

No compensation on losses

While nearly a quarter of companies implemented pay cuts last year, only 12% plan to give higher increment, and 13% are looking to offer one-time retention bonus or higher bonus. About 55% companies are not looking to compensate their employees for the pay loss.

“Organisations largely preferred saving jobs of most to offering higher increments and bonuses to a few. Given that the risks related to the pandemic are not over yet, it is no surprise that they are treading with caution," Ghose added.

From 7.4% last year, 10.2% employees are likely to be promoted in the upcoming financial year. Promotions are expected to come with increments of up to 7%, unlike many dry promotions in the previous year. This is more of a rentition strategy, believes Ghose. Also, among top performers, individual performance will be given more importance, without taking into account the company’s performance, with the person being awarded 1.7 times the increment as compared to those who "meet expectations". What’s more, most companies are not intending to differentiate increments based on employee’s location.

While the projected increment has improved from last year, it’s still lower than the felt inflation of 9-9.5% put out by RBI study, Ghose points out.

March of the young

Another interesting trend the report highlights is the consistent increase in younger workforce across industries, along with a thrust on gender diversity. The report said there has been a 2% increase, from 75% to 77% today, in the number of millennials and post millennials in the workforce as compared to 2019.

The study also notes that 37% companies observed reduction in white-collar jobs between 2019 and 2020. At the same time, 34% companies, mostly in the tech sector, saw increase in workforce by over 5% in the same period.

"We find that salaries are getting corrected, and while hiring has improved, it gone back to the level they were pre-covid. We are not sure whether new jobs are being created. However, sectors where headcount growth is higher (IT, ITes and Life Sciences) are also projecting a high salary increase for 2021," said Ghose.

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