Half of Indian firms may offer double-digit salary hikes in 2023: India is in a bright spot
- ByStartupStory | February 24, 2023
Double-digit salary hikes are expected to continue for the second year in a row across a majority of Indian organisations. Despite macroeconomic volatility, salaries in India are expected to increase by 10.3 per cent on an average in 2023, according to Aon India’s latest survey. While this is a slight drop from last year’s 10.6 per cent, salary hikes have hit a decadal high over the last two years.
According to global professional services company Aon Hewitt Global’s latest Salary Increase Survey, while the numbers show a marginal dip from the actual increase of 10.6 per cent in 2022, India is the only major economy where the projected increase continues to be in double digits, notwithstanding concern about economic volatility.
Of the 1,400 companies surveyed across 40 industries, 46 per cent of organisations are expected to hand out double-digit salary increases in 2023.
Last year, salaries saw a higher-than-normal increase at 10.6 per cent, as organisations had severely cut down on salary increments in 2020 and 2021 due to the pandemic.
“After Covid-19, the projected salary increase for 2023 is 10.3 per cent, clearly highlighting the confidence of companies in India’s growth story,” says Pritish Gandhi, director and leader of the executive compensation and governance practice in India at Aon.
Sumit Kumar, chief business officer, TeamLease says, “Organisations are caught between the devil and the deep blue sea where they have to manage rising costs and retain talent. Under the given circumstances, 10.3 per cent seems viable. While growing inflation and rise in lending interest rates could dampen sentiment of an average salaried employee, the silver lining is that there are no salary cuts which we have seen in earlier recession scenarios.”
Kumar points out that the talent gap is the principal reason for soaring hiring costs and higher attrition levels. “Given the labour market dynamics where skillsets keep evolving, an organisation needs to adopt build versus buy strategy to overcome labour market challenges,” he says.
Meanwhile, India’s attrition rate continued to climb in 2022, reaching 21.4 per cent. The survey pegged an ever-changing talent strategy and the ongoing gap between the supply and demand of talent as the prime causes for this increase.
Involuntary attrition also increased by virtue of recent layoffs. Financial institutions and technology consulting and services saw the highest involuntary attrition at 8.4 and 5.7 per cent, respectively, while manufacturing and automotive industries saw the lowest at 1.8 per cent and 1.9 per cent.
“With first the Great Resignation and then the trend of Quiet Quitting, a sizeable proportion of employees appears disengaged from its workspace. Organisations are, therefore, facing a challenge in not only retaining talent but also driving productivity from existing employees,” observes Roopank Chaudhary, partner, human capital solutions, India at Aon.
According to the survey, companies dealing with technology platforms and products are also likely to see the highest hikes in salaries in 2023, with an industry average of 10.9 per cent.
The projections come amid reports of India’s information technology majors like Wipro backtracking on its initial offers of annual salary packages from Rs 6.5 lakh to Rs 3.5 lakh for freshmen.
Freshman employees have been hurt the most as India’s Big Tech like Infosys and Wipro rationalised their salary spend — onboarding remains tardy, placement hirings scarce, and hundreds of freshman employees laid off if they failed the companies’ internal assessment tests.
Pritish Gandhi, Director and Leader of the Executive Compensation and Governance Practice in India at Aon, said, “The non-merit salary increase projections continue to be moving up as firms budget for retaining talent through promotions and off-cycle corrections. As companies look to differentiate and optimise their talent spend, employers are investing more for critical talent in key roles.”
“Organisations must take a strategic approach to total rewards to build a resilient workforce and shape their strategies towards long-term drivers of pay and performance,” he added.
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