Gloom And Doom On Salary Front

It continues to be gloomy news on the salary front. India Inc is projecting an average pay hike of 10.3 per cent for 2013, which is lower than last year's hike of 10.7 per cent, according to Aon hewitt's annual salary increase survey. And according to Sandeep Chaudhary, partner, Talent and Rewards, Aon Hewitt, the actual figure may even turn out to be a percentage less.

Reflecting the somber economic mood, the average hike has dropped by 14 per cent since last year and 40 per cent since 2007.

Over 40 per cent of the organisations surveyed have reported an average dip of 2 per cent from last year.

Yet, India still stays among the top five nations in terms of salary hikes. Venezuela tops the list at a projected salary hike of 25.6 per cent for 2013, while China is lower than India at a projected salary increment of 9.3 per cent.

 

India also continues to be the nation with one of the highest wage differentials in the world with the CEO drawing 822 times the salary of the juniormost employee. In the US, this is 625 times. Asked if this could not turn out to be a big social issue, Chaudhary responded, "We are seeing increasing shareholder activism around this."

 

According to him, some CEOs in India could be drawing upwards of 6 million dollars per annum as total compensation.

Reflecting growth expectations of just 5 per cent, corporate India is expected to offer its employees an average salary rise of 10.3 per cent for 2013, which might further be revised downwards and may touch 9-9.5 per cent when the actual figure comes out,"In sync with the economic outlook, 10.3 per cent increase is among the lowest the country has seen in a decade (barring the subprime crisis year)," Chaudhary told reporters in New Delhi.

 

He further added that "though business sentiment is strengthening on account of inflation reaching a three year low and stock markets rising upwards, the cautious streak is evident in the projected salary increase numbers."

 

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Key talent continues to get a disproportionate share with average increases projected at 14.1 per cent. While a majority (93 per cent) of the organisations continue to make bonus payouts, tighter performance metrics and a renewed focus on execution and communication of plans is seen. A cost conscious, performance oriented approach continuous to drive prudence in hiring, travel budgets and bonus payouts. Improving productivity and performance linkage of rewards has been reported as the top rewards priority for 2013, followed closely by differentiating programmes for key talent and better execution of programmes.

 

Among the employees, the hikes for the top management have fallen the most over the last six years. Increasing dispersion in salary increases with a view to sustain and manage within limited budgets and reduce impact on the overall wage bill.

 

Life Sciences continues to be a front runner fueled by y-o-y growth while global macroeconomic and sector specific challenges saw FI, ITES, hi-tech and telecom sector salary increases dipping over the past 2-3 years.

 

Auto and manufacturing sectors, which so far have been resilient are giving relatively conservative increase projections on account of overall declining health of domestic economy.

 

Salary increases between key talent and the rest of the population over the years has been seeing a widening gap. Salary increase differential is 35 per cent in 2013 vs. 22 per cent in 2010.

 

Meanwhile, despite the poor economic growth rate of the country, attrition level continued to be very high as corporate India reported an average overall attrition of 19.3 per cent for 2012.

 

However, the attrition level is quite low for key talent, as the average attrition number for key talent in 2012 stood at 5.7 per cent, showing that organisations are reshaping their strategies to safeguard this talent group.

 

Services sector will see a constant struggle to retain talent. Attrition rate for FIs without Insurance stands at 18.9 per cent while in life insurance, the figure stands at 63 per cent. Compensation continues to be the most quoted reason for voluntary attrition in organisations.