Double-digit pay hikes are history
Aon estimates average salary increase in 2018 will be 9.4 per cent
Those expecting double-digit salary hikes in their annual appraisals are likely to be disappointed as Aon, a consulting firm, has projected average pay increases of about 9.4 per cent for 2018-19. The projection is close to the actual annual salary growth of 9.3 per cent in 2017-18.
“Companies in India handed out an average pay increase of 9.3 per cent during 2017, marking a departure from the double-digit increments since the inception of this study. The projections for 2018 are expected to be similar at 9.4 per cent, highlighting increasing prudence by companies while finalising pay budgets,” Aon said in its 22nd annual survey report.
India has been recording double-digit salary growth for the last 10 years, barring 2009, when growth was 6.6 per cent because of a global meltdown. Average salary growth was 15.1 per cent in 2007, 13.3 per cent in 2008, 11.7 per cent in 2010, and 12.6 per cent in 2011. Between 2012 and 2016 annual average growth remained a little over 10 per cent. Salary growth, however, slipped below 10 per cent for the first time to 9.3 per cent in 2017. “The graying of salary increases in India is a reflection on how India Inc is coming of age,” it noted.
Anandorup Ghose, partner at Aon India Consulting, said the decline was mainly on account of creating new jobs and low economic growth.
“India was seeing double-digit growth when the economy was growing rapidly and new jobs were being created. But with job creation having slowed, lower attrition and lower economic growth, the average salary hike is expected to be lower,” the survey said.
It pointed out that last year there were seven sectors – consumer internet companies, chemicals, consumer products, professional services, life sciences, entertainment, and automotive vehicle manufacturing – which had handed out more than 10 per cent hikes in salary. But this year chemicals and entertainment are unlikely to hike salaries in the double digits.
“The double-digit club further shrinks this year with only five members. Additionally, we observe faster moderation of pay increases in sectors like consumer internet companies and life sciences,” the survey noted. Consumer internet companies or e-commerce companies are likely to pay around 10.4 per cent this year as compared to 12.4 last year. Similarly, life sciences companies are expected to be around 10.3 per cent, down from the 11.3 per cent annual average salary hikes in 2017.
“The information technology sector, which has gone through a spate of upheavals in recent times, is projecting an average hike of 9.5 per cent in 2018, whereas third-party IT services are projecting an average hike of 6.2 per cent,” it said.
Aon noted that companies were pruning their salary budgets in the “wake of ongoing economic uncertainty” and were increasingly taking into account the performance and salary budgets of key competitors to determine their own budgets.
Ghose said the companies, however, were paying more to their top performers, leading to a rise in pay differentiation between the top and average performers. “The focus on performance is getting sharper year on year. A top performer is getting an average salary increase of 15.4 per cent, approximately 1.9 times the pay increase for an average performer.”