Salary increments in India are projected to be 10.4% next year, compared to a 10.6% actual increase in 2022. The projections, which are part of Aon’s Salary Increase Survey in India shows that the increase is higher than the 9.9% predicted in its February survey.
The double-digit increase in salaries in 2023 will make it two consecutive years of such growth, which was last seen back in 2015 and 2016, according to the global professional services firm.
Also, India continues to have higher salary increase amongst large nations. The actual salary increase of 10.6% in 2022 was much higher than the rest of the world, and India continues to outpace the developed and some high growth economies as well.
“In India, salary increases end up being a little de-linked from inflation. These increments are still driven by supply-demand in the talent market, the war for talent and the continuous gap in these two economic variables as compared to more developed economies where inflation plays a large role in how salary increases look like,” said Roopank Chaudhary, partner, (human capital solutions) at Aon in India.
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He said that despite the global recessionary headwinds and volatile domestic inflation, salary increases projections for 2023 is a reflection of the confidence that corporate India has on its strong business performance.
“Business leaders, however, need to review their total rewards strategies and balance the impact of rising costs and salary pressures with a relatively high rate of attrition and the ongoing demand for critical talent,” he said.
Furthermore, the attrition rate for the first half of 2022 continued to be high at 20.3%, only marginally lower than the 21% recorded in 2021, thus retaining the pressure on salaries. This trend is expected to continue for the next few months.
The survey also found that four out of the five sectors that are expected to have the highest projected salary increase are technology related. With an expected salary increase of 12.8%, e-commerce leads sectors with the highest projected hike, followed by start-ups at 12.7%, hi-tech/information technology and information technology-enabled services at 11.3%, and financial institutions at 10.7%.
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Sectors which have global linkages like professional services, IT & ITeS and financial services are taking a little bit more cautious approach in 2023 and their increments are slightly lower than the actual increments this year. However, sectors which have a domestic focus — FMCG, real estate, transportation, cement and hospitality — and had taken a big hit during the pandemic, are projecting higher increases in 2023 as compared to the other sectors.
“Volatility is a key determinant of salary increases by industries – the top salary increases are in the most volatile industries,” said Jang Bahadur Singh, director, (human capital solutions) at Aon in India.
With work-from-home and hybrid models gaining prominence in India, Singh said that the companies are not making any wholesale changes in terms of reward philosophy or applying premiums or discounts in pay structures as yet, to avoid introducing risk into their pay structures if others do not follow the same. However, he said that if employees have opted for a completely remote or hybrid model, then on components like travel allowance and HRA (house rent allowance), the eligibility criterion is being applied.