Salary hikes in the domestic services sector could stabilise, starting this year, as companies become cost-conscious and align to international pay standards. According to players in the recruitment industry, since Indian salaries have reached the global standards, the services sector will now gradually cut down on pay hikes over a period.
Annual salary hikes in mainstream services industries across the country are traditionally upwards at an average 20%, while in countries in the West, salary hikes are around 3 to 4% annually.
Speaking to FE, recruitment company Human Capital?s CEO BS Murthy said, ?We expect salary appraisals during July-August to result in lower salary hikes, as companies begin to cut on the increments where ever possible.? He said a pressure on operating margins from huge infrastructure costs and unfavorable dollar – rupee equilibrium would also force companies to re-assess manpower-related costs.
?More initiatives in the export-oriented services sectors would now be cost-driven?, he added.
HR services company Mafoi?s E Balaji said cost cutting on the salary front would not be very aggressive. ?Generally, companies initially take cost cutting to marketing initiatives such as advertising and brand building. Then they turn to human resources. In India, salary levels have now reached global standards, unlike earlier. There are pressures from factors like rupee appreciation or the sub-prime lending issue in the US, there would be a gradual reduction in salary hikes. It could be lower by an average of 3 to 5% this year,? he said.
According to Sandeep Shenoy, strategist at Pioneer Intermediaries, IT companies would hesitate to launch aggressive cutback on salary hikes.
?Rather than drop salary hikes, larger companies would aim to improve billing rates. The smaller players in the sector would be hurt by pressures on revenue from international and domestic economies,? Shenoy said.