Some respite! You can expect 7.3% salary hike this year

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New Delhi: Companies in India are expected to dole out an average increment of 7.3% to employees this year amid faster-than-expected economic recovery and revival in business and consumer confidence, according to a survey.

The first phase of the 2021 Workforce and Increment Trends Survey by Deloitte Touche Tohmatsu India LLP (DTTILLP) also said the average increment this year will be higher than 4.4% seen in 2020 but lower than 8.6% given by companies in 2019.

As many as 92% companies that participated in the survey plan to give an increment in 2021 compared to only 60% last year.

The survey, launched in December 2020 as a B2B India-specific survey, covered around 400 organisations spread across seven sectors and 25 sub-sectors.

“Average increment for companies in India is expected to go up to 7.3% from 4.4% in 2020. This 7.3% projected increment is lower than the 8.6% average increment in 2019. The increase in increment budgets is in line with the faster-than-expected economic recovery, revival in business and consumer confidence, and early signs of improving corporate profitability,” it said.

According to the findings, 20% companies plan to give a double-digit increment this year compared to only 12% in 2020.

Out of the 60 per cent companies that gave an increment in 2020, a third of them did that through off-cycle increments.

Among the companies that did not give an increment in 2020, “only about 30% plan to compensate employees for the previous year through higher increments and/or bonuses,” it added.

The survey further said the life sciences and information technology (IT) sectors are expected to give the highest increments whereas the manufacturing and services sectors continue to offer relatively lower salary increases.

“Life sciences is the only sector that will be able to match its 2019 increment levels. For others, average increment in 2021 is expected to be lower than 2019. Only digital and e-commerce companies are expected to offer double-digit average increments in 2021. Increments are likely to be the lowest in hospitality, real estate, infrastructure, and renewable energy companies,” it added.

Anandorup Ghose, partner at DTTILLP, said COVID-19 has made year-on-year analysis tricky as 2020 has been an anomaly, making 2019 a better year for comparison.

Average India 2021 increment of 7.3% is still considerably lower than 8.6% in 2019. While business activity is rebounding quickly, organisations are managing compensation budgets responsibly considering their affordability and sustainability of fixed cost increases, Ghose noted.

According to him, post March 2020, most companies decided either not to offer increments or defer them until they get more clarity and around 25% companies even extended a pay cut to their senior management.

“… at an all-India level, voluntary attrition reduced from 14.4% in 2019 to 12.1% in 2020, involuntary attrition (layoffs, restructuring, etc.) increased from 3.1% in 2019 to about 4% in 2020. Involuntary attrition increased the most in the IT and services sectors, whereas voluntary attrition reduced across sectors,” it added.

Among priorities for 2021, most organisations identified greater adoption of technology in HR, employee wellness, and continued investment in learning and development as the top three focus areas.