Indian businesses are quite optimistic about a positive economic outlook, even while the the country’s economy is said to have been pushed towards a downturn. Nine out of ten businesses across industries are reported to be doing equally well or better than last year.
A survey carried out by AON, a global professional services firm, covering over a thousand companies, has reported that two out of five industries are likely to offer a double-digit salary in the coming year.
In terms of global outlook, we seem to be doing quite well for ourselves as compared to our neighbours. This is despite the pay increase being the lowest in a decade and not having seen a double-digit projection since 2016.
India is the only country in the APAC region with the highest projected salary increase. The average projected salary increase for the country in 2020, keeping in mind the inflation and GDP growth, is 9.1 per cent. Considering that the GDP growth rate is 5.8 per cent and inflation rate is 3.4 per cent, the salary increase is quite decent — almost three times that of inflation.
There are other countries which have promised higher growth in salaries, but since the growth is lower than the inflation rate, it becomes inconsequential. For instance, in countries such as Egypt, the GDP growth is 5.9 per cent, inflation is 13.9 per cent and salary growth is 12.4 per cent.
India has shown better promise in terms of salary growth vis-a-vis inflation, as compared to many of the developed economies. The US is projected to increase salary by 3.1 per cent, with inflation at 1.8 per cent and GDP growth rate of 2.1 per cent. In the Asia Pacific region, Australia is projected to increase salary at the same level as the US, however with a 0.2 decrease in inflation. Close to home, China’s projected salary increase is at 6.3 per cent with inflation of 2.3 per cent and GDP growth rate of 5.8 per cent. Singapore reports a 3.8 per cent increase accounting for 0.7 per cent inflation.
In India, among different sectors and industries, the e-commerce and professional services top the list among services, with a projection of 10 per cent hike. Information technology (IT) and ITES services follow with 9.6 per cent and 9.5 per cent, respectively.
Organisations today are taking a different approach to benefits by moving away from the traditional model of offering benefits to employees
Among sectors, the pharmaceutical industry (9.9 per cent) shows great promise, with the highest salary growth projection in manufacturing. This is quite a rise for the pharma sector, given that it did not even feature in the top 10 list in the 2019 projections.
Rajorshi Ganguly, president and global HR head, Alkem Laboratories, says, “Pharmaceuticals has been seeing a high growth over the years and it is also one of the industries which has been seeing double-digit increase in salaries in the past few years.”
Around 39 per cent of industries have projected a double-digit increase in salary, while 42 per cent have reported an eight to ten per cent increase. The lowest reported increase is less than six per cent, which has been reported by less than three per cent of the total surveyed companies.
Unsurprisingly, the automotive industry, which saw massive job losses last year is at the bottom of the ladder, with an 8.3 per cent projected hike. The transport/logistics sector is at the lowest rung, with a projected hike of at 7.6 per cent.
Variable Pay: pay at risk
In other areas, pay at risk, which concerns the variable pay offered by companies has continued to increase over the years. The average variable pay as a percentage of total pay has been projected to be highest in financial institutions at 18.7 per cent while it is lowest for the hospitality sector. Pharma which is projected on the higher end in increasing salaries figures on the lower end at 14.7 per cent. Across management, average variable pay has been reported at 23.4 per cent at the senior level, 17 per cent for middle management and 11.4 per cent for junior management. The average variable pay across all industries in 2019 was reported to be 16.1 per cent.
Junior employees are relatively at a lesser risk with a lower percentage of their total compensation coming under variable pay. Moreover, the increase in salary is highest among the junior level employees. The reason for this as cited in the report is because inflation has a direct impact upon the salaries of these employees because of which an increase in pay is essential to counter the rising costs in the market.
Pharma has been on a high growth over the years and that’s why we have double digit increase in salaries in the past few years
The voluntary attrition rate across all sectors in 2019 was 13.5 per cent and involuntary attrition rate was 3.6 per cent. Since 2013, the overall attrition rate has been steadily coming down from 18.5 per cent. However, in 2019 it saw a slight increase from 15.8 per cent in the previous year to 16.1 per cent.
The primary reasons for attrition are reported to be lack of growth opportunities, external inequity of compensation, pursuit of further education, stagnation in one’s role and undesirable nature of work in order of ranking, for 2019. On the other hand, the steady decrease in attrition can be attributed to accelerated career development opportunities, cross-functional mobility, recognition in monetary and non-monetary terms, both fair and equal distribution of rewards and a good work-life balance, again in that order, for last year.
Navneet Rattan, director-performance and rewards consulting, Aon India, says, “Organisations today are taking a different approach to benefits by moving away from the traditional model of offering benefits to employees. Companies are focussing on providing experiences, segmented benefits to different groups working within the organisation, as well as financial and monetary wellness.”
In comparison, results in the previous decade (2010), show that external compensation inequity was the leading cause of attrition in companies. Employee recognition, on the other hand, was listed as the leading driver for retention.