India Inc may hike salaries by 10.3% this year

An employee turnover of 21.4%, a change in talent strategies, and a demand gap in the supply chain are prompting firms to offer double-digit salary hikes, reveals a study by Aon India.

“Growing economic uncertainty and concerns over economic volatility make planning for wage increases this year particularly difficult. India Inc has taken aggressive salary hikes in the last two years, with some companies grappling with high wage bills,” said Rupank Chowdhary, partner, Human Capital Solutions, India at Aon, in an interview.

According to Aon report, around 46% of Indian companies are set for double digit growth. Employees receive an actual increase of 10.6% in 2022, compared to a projected 10.3% increase in 2023. The study analyzed data from 1,400 companies in more than 40 industries.

The Aon report shows that so-called merit increase estimates of an individual’s performance are holding steady at 7.8%, with non-merit increment estimates, ie, expected increases on top of merit increases such as market corrections, special adjustments and promotions. At around 2.8%.

“Non-merit base pay has been increasing for years now. In 2018, about 14% of pay increases were non-merit based, and in 2023, it is projected to be 25%,” said Pritish Gandhi, director and leader of the executive compensation and governance practice in India at Aon.

Non-merit based pay increases take into account factors such as skills, ability of the employee and gender equality. Gandhi highlighted that the latter is gaining prominence as the salaries of women employees for the same profile are lower than their male counterparts.

According to Aon, this year the top performers are likely to get a hike of 16.4% as compared to 16.5% last year. However, if one looks at the actual wage increase – that is, wage growth adjusted against inflation – the total increase for 2023 will be 5.2% compared to 3.7% in 2022.

Key employees can get a four-fold raise, similar to last year’s low-level player. In 2022, the top performer gets a raise of 16.5%; Lower-rated officers got a 4.3% raise. Eight out of 10 companies will give zero raises to their worst performers, which means the gap between the two ends of the spectrum is intensifying.

Gandhi expects the momentum to continue and projects double-digit increases in 2024 as well, making it the third straight year of good wage growth. The last time India Inc posted back-to-back double-digit growth was in 2015 and 2016, he said.

Across sectors, there have been minor changes between 2022 and 2023, but tighter finances have played a role in the tech sector.

“Globally linked industries, such as technology platforms and products, are somewhat cautious in their salary budgets, while domestic demand-driven industries, such as manufacturing or FMCG/FMCD, are on their budget plan as compared to their five-year average. Excited,” added Chaudhary.

Attrition of 21.4% is the highest since 2009, and involuntary exits of 4.4% are expected to exceed 3.9% in 2022. Talent.

IT services, edtech, logistics and fintech startups have seen a spate of layoffs and in the next first half of the year, another 15,000-20,000 workers will be laid off from the Indian tech and startup industry.