Double-digit salary hikes are expected to continue in the country this year despite global recessionary fears and concerns around economic volatility. Salaries will likely increase by 10.3% in 2023, an annual survey by Aon said on Thursday.
This is a marginal drop of 30 basis points from the 10.6% actual increase recorded in 2022. However, as a response to the high attrition rates, the pay hikes will remain in double digits, according to the survey.
At 21.4%, the attrition rate in India remained high in 2022 – a consequence of an ever-changing talent strategy and the ongoing gap between supply and demand of talent, the survey said.
“Rising economic uncertainty and concerns over economic volatility are making salary increase planning difficult this year. India Inc has awarded aggressive salary increases over the last two years, which has some companies grappling with higher wage bills. Globally connected industries such as technology platform and products, are somewhat cautious in their salary budgets, while industries driven by domestic demand such as manufacturing or FMCG/FMCD are bullish on their budget planning compared to their five-year averages,” said Roopank Chaudhary, partner (human capital solutions), India, at Aon.
Organisations are also using data-driven analysis and unique circumstances of their own industry and organisation to plan for salary hikes this year to maintain their workforce resilience and make more-informed decisions, the survey highlighted.
Also, merit increase projections — the increase based on individual performance, stays steady at 7.8%. However, the non-merit salary increase projections — the increases on top of merit increase such as market corrections, special adjustments and promotions is expected to moderate to 2.8%, but is higher than the historical average. At junior levels, the non-merit increase projections are as high as 3.3%.
“The non-merit salary increase projections continue to be moving up as firms budget for retaining talent through promotions and off-cycle corrections. As companies look to differentiate and optimise their talent spend, employers are investing more for critical talent in key roles,” said Pritish Gandhi, director and leader (executive compensation and governance practice), India, at Aon.
The study analysed data across 1,400 companies from more than 40 industries.