Deloitte India’s Workforce and Increments Trends Survey projects an average salary increment of 7.8% for 2020 has been saved
Deloitte India’s Workforce and Increments Trends Survey projects an average salary increment of 7.8% for 2020
New Delhi, 4 March 2020:The inaugural edition of Deloitte India’s 2020 Workforce and Increment Trends Survey provides insights and market trends on salary increments, performance management trends, and information on emerging realities in the area of workforce composition and pay design.
Level of increment
According to the survey findings, companies in India are likely to give an average salary increment of 7.8 percent to employees for 2020. This projected salary increment is 40 basis points lower than the actual salary increment of 8.2 percent that employees received in 2019. The decrease in salary increment budget is in line with the higher margin pressure on companies, economic headwinds, and the need to gradually slowdown white-collar pay growth in India to become more globally competitive.
While the salary increment figure reflects an overall simple average, when adjusted for company size (measured via headcount), salary increment decreases to 7.1 percent. If we exclude the IT sector, headcount weighted projected pay increase drops further to 6.8 percent. This implies that larger organisations are being more cautious with respect to salary increments.
Anandorup Ghose, Partner at Deloitte India, said, “There has been a lot of debate on pay increases over the past few years and there is a need for greater responsibility in this process of salary budgeting as compensation cost ratios are increasingly becoming a sore point in boardrooms across the country. The talent market priorities are different from what they were five years ago, and our pay budgeting process and data needs to reflect that.”
The study found that almost 50 percent companies are projecting a salary increment of less than 8 percent for 2020 and only 8 percent companies are expecting to offer pay increases greater than 10 percent.
While the drop in pay increase projections has been consistent across industries, the manufacturing sector has witnessed the sharpest downturn over the past few quarters. IT product and e-commerce companies are expected to continue offering some of the highest salary increase. They would be the only industry cluster that projected double digit salary increases for 2020. Given the focus on digitisation and automation, the skills in these industries are in high demand across industries. Some other industries projecting above average increments are KPOs, third party BPOs and life sciences. The projected salary increments for 2020 are expected to be the lowest in industries such as infrastructure and real estate, NBFCs, and telecom.
Attrition and aggregate employee cost management
The study found that, while at an all-India level, voluntary attrition slightly reduced in the current fiscal year to about 15 percent, involuntary attrition (layoffs, restructuring, etc.) has increased to 20 percent of the total attrition. Involuntary attrition increased the most in the automobile, insurance, and NBFC sectors. The survey findings also corroborated the increasing impact of automation on the workforce with companies showing reduced hiring levels.
To manage overall cost budgets, organisations focus on differentiation. Performance and potential differentiation remain the central theme according to the survey − 90 percent companies differentiate pay increases on the basis of past-year performance and 34 percent companies focus on differentiating pay based on potential. As the bell curve for companies has become sharper (with only 7 percent employees achieving the highest rating), the differentiation in pay is almost 1.7 times the pay increase for average performers. Organisations also focus on fairness of pay, i.e., giving higher increments to employees who are significantly underpaid in their current roles. More than 30 percent companies also differentiate increments by levels of management. Top/senior management employees get two-thirds of the increment given to middle management employees.
The survey also points towards the constantly evolving workforce dynamic with 74 percent white-collar workforce in India being born after 1980 and a quarter of the total workforce being women. While the gender diversity ratio remains skewed and divergent across industries, it is improving across the board.
“Salary increments in India are likely to transition from a more classical rule-bound approach to one which is far more based on individual performance and skills. The level as well as the change in compensation is likely to reflect the pace of learning and accumulation of skills required for the job. Roles that combine functional knowledge with technology are likely to command a significant premium, making pay decisions far more driven by skills that employees bring as opposed to simple annual corrections,” said Anandorup Ghose.
The 2020 Deloitte India Workforce and Increment Trends Survey was launched in January 2020 as a B2B India-specific survey. The primary audience for this survey was seasoned HR professionals. Close to 300 organisations participated in this inaugural edition spread across 7 sectors and over 20 sub-sectors. The voluntary survey was conducted through Deloitte’s proprietary online tool. The responses received from the participants were validated and checked for accuracy and intended interpretation.
Kindly note that “2020” and “2019”, wherever used in this press release, refer to the 2020-2021 and 2019-2020 fiscal years respectively.
Notes to the editor for reference purposes only
This press release has been issued by Deloitte Touche Tohmatsu India LLP.
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Deloitte India herein refers to Deloitte Touche Tohmatsu India LLP.