A faster-than-expected economic recovery, revival in business & consumer confidence, and early signs of improving corporate profitability are the reasons cited for the projected salary hikes. The 7.3% increment in 2021, up from 4.4% last year, however, is lower than the 8.6% average hike in 2019.
“This uptick is still a conservative one than any of us would have seen in previous years. Companies are being conservative than being exuberant at this point. Promotions and promotion-linked pay increases have gone up. There’s a 250-basis-point (100bps = 1 percentage point) increase in the percentage of employees that will get promoted this year,” said Anandorup Ghose, partner at DTTILLP Workforce and Increment Trends Survey. About 400 organisations participated in this edition across seven sectors.
Deloitte said organisations adopted a very conservative approach to promotions last year due to the pandemic and an uncertain business environment. “Many people lost out on promotions because of the pandemic. The higher number of promotions implies huge costs even as companies are trying to get back into shape,” he said. The average promotional increase has also gone up to 6.9% in 2021 from 5.4%.
About 20% of the companies plan to give a double-digit increment in 2021 compared to 12% last year. The survey also finds that of the 60% of companies that gave an increment in 2020, a third of them did off-cycle. Life sciences and IT sectors are expected to give the highest increments, while manufacturing and services will offer a relatively lower package.
Life sciences will be the only sector that will match its 2019 increment levels. Of the companies that did not give an increment in 2020, only about 30% plan to compensate employees for the previous year through hikes and/or bonuses.
Organisations continue to use individual performance to differentiate increments across employees. The top performers are expected to get 1.7 times the increment given to employees who “meet expectations”. Companies expect to place fewer employees in the “below expectations” category this year. At an all-India level, voluntary attrition reduced 12.1% in 2020 from 14.4% in 2019. Involuntary attrition (layoffs, restructuring) increased from 4% to 3.1%.
Recently, global advisory firm Willis Towers Watson’s report said that salaries in India are projected to rise by an average of 6.4% in 2021 (translating to a median increase of 7%). This is marginally higher than the average actual increase of 5.9% in 2020.