Salary hikes at 7.7 percent this year, finds survey

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Despite a tough 2020, India continues to project the highest salary increases among BRIC nations, according to Aon’s 25th Annual Salary Increase Survey in India. The industries looking to provide the highest salary increases are ecommerce, high technology, information technology (IT), IT enabled services (ITeS), entertainment and gaming, chemicals, life sciences, pharmaceuticals and professional services. Ecommerce and venture capital-backed firms will offer the highest salary hike of 10 percent, whereas the hospitality sector will offer the lowest at 5.5 percent in 2021.

According to the survey, the salary freeze that was implemented amid the coronavirus outbreak last year has now been revoked. The study analysed data across 1,200 companies from more than 30 industries. Eighty-eight percent of the companies surveyed reported that they intend to increase salaries in 2021, reflecting positive business sentiments. However, since 2012 salary hikes in India have seen a downward trend. In fact, last year saw the sharpest fall, to 6.1 percent, due to the Covid-19 crisis; it is projected to be at 7.7 percent this year.

Nitin Sethi, partner and CEO of Aon’s performance and rewards business in India, says they expect the increment dynamics for 2021 to play out over a longer period of time, given the uncertainty and potential impact of forthcoming changes. The proposed definition of wages under the new labour laws could lead to additional compensation budgeting in the form of higher provisioning for benefits such as gratuity, leave encashment and provident fund. “We expect organisations to review their compensation budgets in the second half of the year once the exact financial impact of the Labour Codes is known. It is also possible that some of the salary increments may not translate into higher cash-in-hand for employees if organisations choose to pay higher provident fund contributions on the new definition of wages,” he adds.

The highest-paying sectors in 2021 continue to be the ones from last year—IT, ITeS, life sciences, ecommerce and fast-moving consumer goods, says Roopank Chaudhary, partner in Aon’s human capital business in India. “It’s notable that the sectors that were adversely impacted by Covid-19, such as retail, hospitality and real estate, are projecting healthy increases in the range of 5 to 6 percent. Such numbers reflect their intent to stay relevant and to control attrition, which had increased for these industries last year.”