Towers Watson predicts a 10.8 % hike in 2016

Employers and employees have a different set of beliefs and expectations in the current situation, and this isn’t a healthy trend.

Following the raising of the salary bar for Central Government employees by the 7th Pay Commission, Indian corporate employees can also expect a decent salary hike in the coming year, vis-à-vis other employees in the Asia Pacific region.

As per Towers Watson, the projected average salary hike in India will be 10.8 per cent in 2016, while in the Asia Pacific region, the average salary hike will be 6.8 per cent.

The ‘top performers’ in India can expect an average increase of 12.5 per cent, while the raise for ‘above average’ and ‘average’ performers will be around 11 per cent and 9.7 per cent, respectively.

However, factoring inflation, the effective raise in salary will be slightly higher than last year. With the current inflation rate at 6.1 per cent, the net salary increase in 2016 is expected to be marginally higher at 4.7 per cent as against 4.5 per cent last year, when the inflation rate was at 5.9 per cent.

As mentioned, the salary budgets in the APAC region are set to rise 6.8 per cent in 2016, slightly higher than 6.6 per cent in 2015.

With inflation factored in, average increases will be 3.4 per cent in the coming year, compared to 4.1 per cent this year.

In 17 of the 22 Asia Pacific markets covered by the survey, employees will go home with less money next year. Average inflation in 2016 is expected to grow at 3.4 per cent, up from 2.5 per cent in 2015.

Sambhav Rakyan, data services practice leader, Asia Pacific, Towers Watson says, “The normal practice is to keep the previous year’s figures as a benchmark while deciding on an appraisal figure for the current year. Companies need to be smart about how they use limited salary budgets, because high volatility and talent crunches are causing frequent shifts in pay. Determining current pay rates for jobs in a highly competitive talent market is akin to shooting at a moving target.”

“What companies pay for a job today might be different tomorrow, and if managers don’t keep an eye on the market, they could risk losing valuable talent to the competition,” he adds.

Interestingly, employers and employees have a different set of beliefs and expectations in the current situation, and Rakyan believes, this isn’t a healthy trend.

Between the first and third quarters of 2015, the positive business outlook of employers shrank from 58 per cent to 41 per cent. On the contrary, employees had bullish expectations in terms of appraisals. Such a mismatch can turn out to be fatal.

“Employers will need to carefully and proactively manage employees’ long-term expectations, if they are to achieve a harmonious and contented workforce.” says Rakyan.

Towers Watson predicts that in the coming year, there will be greater segmentation and personalised delivery for compensation, with a corresponding increase in different forms of reward options, especially for high performers.

It suggests that organisations will need to have open lines of communication about pay, and play an active role in helping employees understand the rationale behind pay decisions.

In India, the highest raise will be in the energy sector, with a projected increase of 11.5 per cent. This is because, India’s energy sector is seeing some big changes with the Government’s push towards the sector, especially in the renewable energy space, and these may be key indicators driving salary increases.

The second highest raise will be in the pharmaceuticals and health services sector, where the average increase will be around 10.9 per cent followed by the high-tech and financial sectors, with an increase of 10.7 and 10. 4 per cent, respectively.