Bad news for Indian workers: Double-digit raises are a thing of the past

Nothing exciting.
Nothing exciting.
Image: EPA/Jagadeesh NV
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Indians hoping for good increments this year have little reason to be chipper.

After over two decades of double-digit increments—except in 2009 when the average annual raise was 6.6%—Indian companies increased salaries by 9.3% in 2017, global professional services firm Aon found in its annual Salary Increase Survey. The study, published on Feb. 27, covered over 1,000 firms from more than 20 industries.

Expectations for 2018 are at an equally modest 9.4%, “highlighting increasing prudence and maturity being displayed by companies while finalising pay budgets,” Aon said.

There’s a silver lining, though. A handful of sectors such as professional services, consumer internet companies, life sciences, automotive, and consumer products continue to project double-digit growth in salaries. For consumer internet companies, however, pay scales are growing at a much slower pace than before.

Across industries, though, good work begets good money.

Earning your worth

Experience and performance count a lot.

A performer who exceeds expectations gets an average hike of 15.4%, approximately 1.9 times the 8.3% increase given to regular employees.

“With increasing maturity, HR (human resources) budgets are being realigned towards top performers as opposed to the broader population,” Anandorup Ghose, partner at Aon India Consulting, said.

More experienced personnel are also likely to get substantially higher variable pays—the additional compensation based on employee performance.

“Pay increases are becoming more nuanced,” Ghose commented. “We are seeing a multitude of factors impacting salary raises such as (the) size of the company, business dynamics within the sub-industry, nature of talent requirements, and quite obviously, performance.”

As rationalisation sets in, India is starting to close in on global norms. ”The ratio (of salary increases to GDP growth rate) for India is gradually merging with the global line—a sign of the reducing froth in this segment,” the study says, suggesting that unrealistic hikes of the past are on the decline.

And these moves have helped companies retain talent. Over time, the attrition rate in India, too, has displayed a downward trend, falling from an average of 20% in the previous decade to 15.9% in 2017.