Indian companies are gearing up to provide their employees with substantial salary increases in 2024, despite the prevailing global economic slowdown. According to the recent WTW’s Salary Budget Planning Report, Indian firms are expected to grant their workforce an approximate salary increase of 9.8 percent for the upcoming year, aligning closely with the remarkable 10 percent rise they experienced in 2023. This projection places India at the forefront of the Asia Pacific region concerning salary increments. But what factors are driving this trend, and what does it mean for the Indian economy and its workforce?
India’s economic momentum and workforce dynamics
Several factors underpin this trend of salary increments in India. Firstly, India boasts a youthful and expanding economy with a substantial workforce, creating an environment of intense competition for talent. The need to attract and retain skilled employees is a driving force behind these significant salary increases. Secondly, many Indian companies operate within the technology and fast-growing sectors, which typically offer more substantial compensation packages to remain competitive. Lastly, the Indian government has introduced measures to encourage business growth and job creation, fostering economic advancement and providing a conducive backdrop for wage growth.
Challenges in the labour market and inflation
Companies are revising their salary increase budgets for 2024, primarily due to two key concerns: tightening labour markets and escalating inflation. In the backdrop of these challenges, organisations are finding themselves embroiled in fierce competition to both attract and retain top talent. The heightened competition has led to increased salary offers, as companies are now more willing to provide premium wages to secure the services of exceptional employees.
Simultaneously, the upward trajectory of inflation is adding further strain to salary budgets. As the cost of living rises, employees naturally expect their salaries to keep pace. This has led to higher salary expectations among the workforce, compelling companies to respond by increasing salaries more significantly than they might have otherwise.
Companies responding to market realities
The WTW report reveals that more than half of the companies surveyed have expanded their salary budgets for the current year compared to figures from 2022. Moreover, a quarter of these organisations have even exceeded the budget projections they set in December 2022. This signals a growing willingness among companies to provide more substantial salary hikes, even in the midst of economic uncertainty.
Lucrative sectors
In anticipation of 2024, some sectors are preparing for the most substantial salary increases. These include the technology, media, gaming, financial services, and retail sectors, which are projected to offer approximately 10 percent salary increases.
Several factors contribute to these high-paying projections. These industries are currently experiencing rapid growth and, as a result, require a skilled workforce. The heightened demand for talent has emerged as a primary driver behind the expected salary uptick. Additionally, the competitive landscape in these sectors is driving intense efforts to attract and retain top-tier talent, further intensifying the upward pressure on salaries. These sectors also emphasise innovation to remain competitive. Therefore, companies in these fields often invest in their employees, translating into higher salaries.
Additionally, other sectors such as BFSI (Banking, Financial Services, and Insurance), retail, and captives are also projecting marginally higher salary increases for 2024, indicating optimism about their future growth and underscoring their commitment to investing in their workforce.