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India Inc may hike pay by 9.7% this year: Study

The upcoming appraisals season may bring some cheer to the salaried class as increments will exceed last year’s pay hikes, albeit marginally, on the back of a positive economic outlook.

Global HR consulting firm Aon’s Salary Increase Survey, released on Tuesday, projects an average 9.7% increment for Indian employees in 2019 — a marginal increase from 2018 when India Inc doled out a hike of around 9.5%. With current inflation at around 2.5%, and assuming it remains at these levels for the rest of 2019, the salaried class are set to enjoy 'real' increases (net of cost of living) at approximately 7%.

"We are noticing a shift from a more broad-based war for talent that existed in the past to a war for more specialised high-performing talent," Aon partner and head (emerging markets) Anandorup Ghose told TOI.

India Inc is expected to continue nurturing a payfor-performance culture in 2019, as Aon noted fewer high performers getting paid higher premiums, with differentiation factor increasing from 1.3x in 2013-14 to 1.9x in 2018-19.

Companies are also coming of age when it comes to compensation planning. A look at the results of Aon’s survey over the last decade showed that pay hikes in India have stabilised and hit a sweet spot at the 9.5% mark.

When it comes to factors driving modest pace of increments in recent years, the survey found that Indian companies are increasingly relying on the payroll cost-to-revenue ratio in rewarding employees. The days of double-digit hikes may be over for Indian employees as voluntary attrition rates continue to drop across industries, the survey said.

According to Aon, overall attrition fell from 18.1% in 2014-15 to 15.8% in 2018-19. Interestingly, involuntary attrition went up from 3.3% to 3.9% in the same period, at the entry level, owing to cost-rationalisation and rising automation.

"Salary increases are now as much a business decision as they have ever been," First Mumbai Consulting MD Shekhar Purohit told TOI. "In general, we are seeing a greater differentiation of 'increases' between high performers and average and low performers."

Majority industries also seem to be entering the election year on a positive note as 16 out of 20 industries surveyed have budgeted for higher pay increases in 2019.

Consumer internet enterprises, professional services, life sciences, automotive and consumer products emerged as outperformers, and are projected to offer doubledigit hikes in 2019. However, most of these sectors chose to exercise prudence, offering wage hikes marginally lower than last year.