Forget double-digit pay hikes this year, too: Aon survey

The average double digit increase in salary may soon become a thing of the past.

For 2019, an average salary hike of 9.7% across industries has been predicted by a survey from Aon, an HR consultancy firm. Though, the number is going up marginally since 2017 where the average hike stood at 9.3% and 9.5% in 2018.

The industry has come far from a point where the salary hike was in double digits at around 15.1% in 2007 to 12.6% in 2011. From 2012-2016, the numbered hovered around 10 % -- 10.7% in 2012, 10.2% in 2013, 10.4% in 2014, 10.4% in 2015 and 10.2% in 2016, according to data from Aon Hewitt.

"The pre election year has some realities associated with it. If sentiments significantly move up post May/June this year, then we might see better numbers in FY20. However, we do not expect 12-13% increases, which used to happen in the past to come back," Anandorup Ghose, partner and head emerging markets, Aon told DNA Money.

If there will be better hikes, it will be more for critical talent and not for average hike going up, he said.

Sectors projecting a double-digit increment have come down over the years, with only five sectors projecting a double-digit increment for 2019 such as consumer internet companies, professional services, life sciences, automotive and consumer products.

When asked about the impact of impending elections on the hiring/hike scenario, Ghose said, MNCs in India follow April-March cycle mostly, for them, there won't be any change because of the elections. "For Indian companies, which pay hikes later towards June might see a bit of difference if the perception or sentiment changes post elections. Though, ground realities remain same."

Every election year presents a set of interesting dynamics in how companies plan and execute on budgets."We expect this year to be no different. But we are fairly confident that the double digit pay increase days are well behind us as India Inc shows maturity in managing economic and political cycles," he said.

Suchita Dutta, executive director, Indian Staffing Federation (ISF), expects the average salary hike to remain between 5% and 9% in the current year across sectors because of "slump in new employment".

"It (salary increments) will be in the single digit in this year. Double digit rise (in salary) this year would be difficult because there is a slump in new employment. What is happening is the current employment growth basis productivity is also something that is a little constricted at this point in time. So, there could be some kind of ripple effect this year. Obviously, there are high performers who will get a double-digit hikes, but the average hike will be between 5% and 9%. It could go down below 5% for people who have not been performers," she said.

According to her, even though salary hikes are sector agnostic, employees in some promising sectors like e-commerce and IT may see above average increase in their pay.

According to Aon, the companies are also re-looking their hiring strategy and focusing on hiring key skills that will determine the success of the business over the longer term. With digitisation becomes the new normal, companies are investing in these niche skills to stay relevant in the changing business scenario.

The survey analysed data over 1,000 companies from more than 20 industries.

The projections for 2019 are stable yet favourable at 9.7% as companies expect a positive economic outlook backed by high economic growth expectation, high domestic demand and low inflation, Aon said.

A big highlight is the reducing difference in pay increases across industries year on year. A lot of the pay increase decline is also reflected in the constant drop in voluntary attrition levels across industries, Ghose said.

With government focus on infrastructure investment, sectors such as cement, metal, engineering services saw a revival in demand and an improvement in increment projections for 2019. While India Inc saw a positive shift in increment percentages, attrition continues to maintain the downward trend. The attrition has declined from 18.5% in 2013 to 15.8% in 2018, according to Aon.