India sees lower salary hike for 2 straight years

New Delhi: No “acche din” for the salaried class as Indians will only get single digit hike in salaries in two consecutive years of 2017 and 2018. Lower income growth for two consecutive years has happened  for the first time in 22 years, according to HR consultancy firm Aon Hewitt’s. In 2017, the average salaries hike was 9.3 per cent and in 2018 it is projected to remain at the same level at 9.4 per cent despite forecasts of improvement in macro-economic situation, according to  Aon Hewitt’s annual India salary increase survey.

The need for cost prudence in the wake of ongoing economic uncertainty came across as the single most critical factor for rationalisation of salary budgets, it said. Moreover, the attrition rate in India is seeing a continuous dip, indicating fewer opportunity to move as the economic got hit by the double whammy of note ban and GST. Overall, attrition has come down from an average of 20 percent in the previous decade to 15.9 per cent in 2017, said the survey.

“As per the survey, companies in India gave an average pay increase of 9.3 per cent during 2017 marking a departure from the double digit increments given by organisations since the inception of this study,” said the company. The survey was initiated in 1995-1996. Aon believes average pay increases in India will remain between 9.4-9.6 per cent. It said that the focus on performance is getting sharper year-on-year. “A top performer is getting an average salary increase of 15.4 per cent, approximately 1.9 times the pay increase for an average performer.” Moreover, the bell curve is sharpening with a significant drop in the percentage of people in the highest rating.

In the last 10 years salary hikes have been seeing a somewhat downward bias. In 2007, the average salary hike was 15.1 per cent, which went down to 6.6 per cent in 2009 after the financial crisis. In 2010, it again rose sharply to 11.7 per cent and in 2011 it further went up to 12.6 per cent. However, between 2012 to 2016 salary hikes have been around 10 per cent.

The survey said that over the years, with increasing pressure on compensation budgets, there is an emerging focus on rationalisation of budgets. “Companies are increasingly taking into account the base effect e.g., pay increases for top and senior management is consistently going down,” it said. The study analysed data across 1,000 plus companies from more than 20 industries.

The survey said that sectors such as professional services, consumer internet firms, life sciences, automotive and consumer products continue to project a double digit salary increase for 2018. Consumer internet firms however, over the past three years have seen a significant drop of 250 basis points, from 12.9 per cent to 10.4 per cent projected for 2018. Engineering services, financial institutions and cement industry is going to see the slowest hike in salaries in 2018.