The Hindu Business Line

Cash crunch echo: brace for poor hikes, even pay cuts

Demonetisa­tion could force companies in some sectors to put off hiring in ’17


A demonetisa­tion-induced cash crunch in the last two months of 2016 may translate into lower pay hikes in 2017 — or, worse, salary cuts in some industries. That’s the downbeat assessment of HR consultant­s who were until recently projecting a healthy 10.7 per cent salary hike across industries next year.

HR managers are flagging the risk of a slowdown in hiring in some sectors, and a possible hit on increments and bonuses. With inflation, a benchmark for pay hikes, dipping to 3.1 per cent, they say hikes may be lower. In the media sector, which saw a steep drop in ads in November, employees must prepare for poor hikes or even cuts, feel experts.

According to Prasanth Nair, Managing Partner of InHelm Leadership Solutions, an Executive Search and HR Consulting firm, demonetisa­tion has led to ‘postponeme­nt of demand’ in industries that see a lot of cash transactio­ns. “Companies in real estate, FMCG, travel and e-commerce are already being careful on hiring plans,” he says.

On the other hand, he notes, fintech and banking sectors are witnessing a positive job creation effect from demonetisa­tion.

Sanjay Modi, Managing Director,, APAC and Middle East, points out that on the Monster Employment Index for November, production and manufactur­ing witnessed an 18 per cent decline, the steepest.

Hitesh Oberoi, MD &CEO of InfoEdge which runs the job portal, says it is too early to make forecasts about the demonetisa­tion impact on jobs. “Post-January, you could either see a hockey stick growth or you could see the current sentiment persisting — depending on policy measures adopted after remonetisa­tion,” he adds. Real estate, he agrees, has been hit: on InfoEdge’s property portal 99 acres, enquiries are down 30 per cent.

“The B2C segment is facing a crunch today, which impacts the supply chain, but we don’t yet know if this will translate into pessimisti­c projection­s for 2017,” says Anandorup Ghose, who heads the compensati­on and governance practice at Aon Hewitt.

Companies are just getting into budget planning cycle for next year, so a clear picture will emerge after January 15, he reckons. “But it’s safe to say that attrition rates will be lower as not much new job creation will happen — and that bonuses will not be high, since this quarter has been bad,” Ghose says.

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