India Inc to dole out average salary hike of 9.4% this year: Aon Hewitt

The average increase in salaries in India is expected to be at 9.4% this year, though high performers are likely to get double-digit hikes.

Key talent/high performers are expected to get a raise of about 15.4% in 2018, 1.9 times higher than that for an average performer, according to a survey by Aon Hewitt.

High performers roughly constitute 15% of total employees of an organisation, Anandorup Ghose, partner at Aon India Consulting, told DNA Money.

When asked about skill sets of high performers, he said for organisations these 15% employees are critical given their context, the needs of the job. "They could be possessing specific skills, particular competence level, it could be performance level. Critical talent does not only mean digital skills or AI (artificial intelligence). Many factors contribute to this."

But in spite of all positives such as fantastic stock performance, improvement in business financials and a good GDP growth, the pay numbers are not moving up like they used to earlier. "Compensation costs for organisations has become so expensive, it's difficult for them. Perpetually, you cant be growing at these high numbers (of earlier salary hikes)," Ghose said.

Though, he said, if employees have certain skills which company considers critical, they will be always be rewarded disproportionately. "The extent of that disproportion has been increasing. Earlier, it used to 1.5 times up than an average employee, now it is around 1.9 times."

Even at this level, India continues to lead the Asia-Pacific region in terms of salary hikes. Globally, China is expected to give a raise of 6.7%, Philippines 5.8%, Malaysia 5.1%, Singapore 4%, Australia 3.2% and Japan 2.5%. The average pay increase in India will remain between 9.4 and 9.6% as against 9.3% in 2017, marking a departure from the double-digit increments given by companies since the inception of this study.

Also, the focus on performance is getting sharper every year. The bell curve is sharpening with a significant drop in the percentage of people in the highest rating, as per the survey that analysed data of over 1,000 companies from more than 20 industries.

"With critical skills shortage highlighted as a key concern, companies are becoming more cautious while recognising and remunerating their key talent. With increasing maturity, HR budgets are being realigned towards top performers as opposed to the broader population," he said.

Sectors that are expected to give hikes in double digits in 2018 include professional services at 10.6%, consumer internet companies at 10.4%, life sciences at 10.3%), consumer products at 10.2% and automotive vehicle manufacturing at 10.1%, while sectors expected to pay less than 9% jump increase include engineering services at 8.9%, financial institutions at 8.5% and cement at 8.4%.

The Hi-Tech/ IT sector, which has gone through a spate of upheavals in recent times, is projecting an average hike of 9.5% in 2018, whereas the third-party IT services which provide majority of the employment in India are projecting an average hike of 6.2%, the survey said.

Over the years, with increasing pressure on compensation budgets, there is an emerging focus on the rationalisation of budgets. Companies are increasingly taking into account the base effect such as pay increases for the top and senior management is consistently going down.

However, the attrition rate in India is seeing a continuous downward trend as the overall attrition has come down from an average of 20% in the previous decade to 15.9% in 2017.