Companies in India are likely to offer a 7.7 per cent salary increase in 2021, one of the highest among the BRIC nations, and higher than the average actual increase of 6.1 per cent in 2020, says a survey. Global professional services firm Aon Plc on Tuesday released insights from its latest Salary Increase Survey in India, as per which 88 per cent of the surveyed companies reported that they intend to increase salaries in 2021, as compared to 75 per cent companies in 2020, reflecting positive business sentiment.
The study, that analysed data across 1,200 companies from more than 20 industries noted that while salary increments indicate strong recovery, the Code of Wages could be a gamechanger. “We expect the increment dynamics for 2021 to play out over a longer period of time given the uncertainty and potential impact of forthcoming changes,” Nitin Sethi, partner and Chief Executive Officer of Aon’s performance and rewards business in India, said.
The proposed definition of wages under the new Labor Codes could lead to additional compensation budgeting in the form of higher provisioning for Benefit plans like gratuity, leave encashment and provident fund, Sethi noted. “We expect organisations to review their compensation budgets in the second half of the year once the exact financial impact of the Labor Codes is known. It is also possible that some of the salary increments may not translate into higher cash-in-hand for employees if organisations choose to pay higher provident fund contributions on the new definition of Wages,” he said.
As per the survey, sectors with the highest projected increases include, e-commerce and venture capital, hi-tech/information technology, ITeS, life sciences. On the contrary, sectors with the lowest projected increases include hospitality/restaurants, real estate/infrastructure, engineering services.
It further noted that attrition has been one of the lowest in the last few years at 12.8 per cent, which talks about the maturity of India Inc and also lesser opportunity for people to move as they preferred to wait and watch.
Despite a tough 2020 with stringent lockdowns, India continues to project the highest salary increases among the BRIC nations, the survey noted.
“The highest-paying sectors in 2021 continue to be the ones from last year information technology, information technology-enabled services, life sciences, e-commerce and fast-moving consumer goods,” said Roopank Chaudhary, a partner in Aon’s human capital business in India.
Chaudhary further noted that “It’s notable that the sectors that were adversely impacted by COVID-19, such as retail, hospitality and real estate, are projecting healthy increases in the range of 5-6 per cent. Such numbers reflect their intent to stay relevant and to control attrition, which had increased for these industries last year.”