Indian firms to offer 10.3% pay hike to their employees

by CXOtoday News Desk    Feb 20, 2013

Iindian office

Indian companies are expected to dole out an average salary increase of 10.3 per cent for their employees this year, according to global human resource firm Aon Hewitt. The company’s Annual Salary Increase Survey 2013 estimated that this is the lowest salary hike of the decade Indian companies are offering to their workers except for the year 2009. However, the raise is in sync with the 5 per cent growth expectations in India.

The study conducted by Aon Hewitt shows a wide variance of salary increases across sectors. For example, sectors such as IT, financial services and outsourcing that had seen the greatest volatility are expected to remain cautious this year. However the consumer and industrial sectors which were resilient until recently, reported conservative increase in projections. In 2012, Indian enterprises offered an average hike of around 11 per cent despite tough economic conditions.

“Though business sentiment is strengthening on account of inflation reaching a three year low and stock markets rising upwards, the cautious streak is evident in the projected salary increase numbers,” said Sandeep Chaudhary, Partner - Talent & Rewards at Aon Hewitt India.

In recent times, owing to shrinking salary budgets, enterprises are creating sharp differentiation in salary increases between their key talent and the rest of the workforce according to the survey. This year, key talent is projected to get an average increase of 14.1 per cent. Chaudhary added that cost consciousness and performance orientation are the key themes this year. “Organizations are looking at compensation and productivity together and hence closely evaluating the return on compensation spent,” he said.

As far as sector-wise projections are concerned, the pharma industry, with a projected CAGR of 15.3 per cent has topped the chart in salary increase amongst others that project an average of 13.5 per cent for 2013. With the positive outlook in allied sectors such as medical devices, medical technology and medical tourism, the overall healthcare and life sciences sector also reported the highest salary increase average at 13.1 per cent.

This is followed by the FMCG sector that has seen the highest salary increase in the last 5 years, estimated an increase of 12.3 per cent for this year. The automotive sector which was hit by lower production and high costs in 2012 also projected an increase of 11 per cent in 2013 – which is above the India Inc. average, but a decrease of 1.8 per cent from the previous year.

While the financial sector projected the average salary increase as 8 per cent, mostly driven by the banking and insurance sectors, the infrastructure sector however projected a relatively lower salary increase at 6.1 per cent due to scarce funds and delay in clearance.

The telecom industry, which is reeling under several business and regulatory issues, continues to project its salary hike at 9.6 per cent for 2013, followed by IT services that also show a conservative salary rise of 9.6 per cent. On the other hand, IT product companies that are seeing positive growth opportunities in the domestic market posted a salary increase of 11.2 per cent. The ITeS industry also projects an average increase of 10.1 per cent for 2013.

The survey also notes that enterprises are looking at various ways to rationalize wage costs and improve utilization and productivity, with a view to sustain desired business performance.