Information Technology Enabled Services (ITES) witnessed the highest salary increase of 12.6 per cent in 2002. Other leading increases took place for software development, accounting/consulting, fast moving consumer goods (FMCG)/retail and pharmaceuticals with 11.2, 10.9, 10.8 and 10.6 per cent respectively.
The worst performers were banks, automobiles, chemicals, hotels and financial services with increases of 5.7, 8, 8.1, 8.3 and 8.9 per cent respectively.
All of the sectors are expected to witness a marginal increase in 2003, except pharmaceuticals, banks and chemicals which would see drops of up to one percentage point.
In absolute terms, banking and consulting, FMCG and ITES continued to be the highest paymasters. The survey covered 374 companies in the private sector.
The report also showed 98.6 per cent of the surveyed companies having a performance management system in place, while 88.1 per cent link salary increase to performance rating. Outstanding performers got a 18.45 per cent raise, compared to just 3.9 per cent for those with below average performers. Average and above average workers got a 10.5 and 14.2 per cent raise respectively.
There has also been a increased incidence of variable pay last year, a trend that could continue to rise by a few percentage points across all employee categories in this year. Senior/top management had 16.5 per cent of their remuneration in the form of variable pay. Managers, supervisors, clerical and manual labour categories had 13, 10.8, 7 and 4.1 per cent respectively.
What has also come out are falling increases since 1997 for most of the employee categories, from highs of about 24 per cent to around 10 per cent last year. However, this trend is expected to reverse in 2003.
A majority of respondents agreed that their companies could save costs not as much as by cutting salaries, but looking at other cost heads. They see business sense to outsource non-core business activities. The top three human resource activities being outsourced currently are market benchmarking and design of compensation programs, training programs and statutory compliance. In contrast, the one ranked as most important to be outsourced are salary and benefits processing.
About half the respondents also faced challenges in attracting and retaining talent, up from around 40 per cent in 2001. The job groups posing the greatest challenges were information technology, sales, marketing and operations. The strategies most commonly used to attract and retain talent were seen as perquisites like training and re-training, flexible work hours and compressed work hours.