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India Inc may offer an average salary hike of 9.6 per cent in 2024, similar to the actual increase last year, according to a report released by global professional services provider Ernst & Young (EY).
The ‘Future of Pay 2024’ report states that the highest salary hikes are expected in e-commerce (10.9 per cent), financial services (10.1 per cent), and 10 per cent each in professional services and real estate.
The expected hike will be lower than the 10.4 per cent seen in 2022. In 2023, the highest salary hikes were seen in e-commerce (10.5 per cent), and 10.4 per cent both in auto/vehicle manufacturing and financial services.
The report highlighted that the fall in the quantum of salary hikes compared to 2022 was majorly due to the e-commerce sector and technology sub-sectors.
"In 2022, certain technology sub-sectors, like cloud platforms and consumer technology, experienced notable growth.
"However, there is a projected decrease across all technology sub-sectors by 2024, potentially due to market saturation following rapid digital transformation in previous years," it said.
For e-commerce, the report said, the fall may be attributed to "pandemic-driven shifts in consumer behaviour or intensified online competition".
Variable pay percentage likely to fall
In 2023, the average variable pay-out as a percentage of total fixed salary in India was 15.05 per cent.
However, the report showed that the proportion of variable pay increases as the person goes up in the organisation.
Last year, 9.2 per cent of the salary of individual contributors and 10.7 per cent of people managers were distributed as variable pay.
For function heads and executives (CXOs), this was higher at 14.1 per cent and 26.2 per cent, respectively.
In 2024, variable pay percentages are likely to decrease at all employee levels except the lowest-paid tier.
"Executives typically get the most variable pay, but their projected salary increases for 2024 are lower than those in 2023," it said.
Attrition falls near pre-pandemic levels
The report said the attrition in India cooled down to near the pre-pandemic level of 18.3 per cent in 2023 from 21.2 per cent in 2022.
Different surveys peg the attrition level in the pre-pandemic year in the range of 16-18 per cent.
Out of 18.3 per cent, 15.2 per cent was voluntary attrition, and 4.2 per cent was involuntary.
"Interestingly, data shows a decrease in employee inclination to leave their jobs compared to last year, suggesting a drop from 43 per cent to 34 per cent," the report said, adding that it continues to be, however, higher than historical norms.
The highest attrition of 13.2 per cent was witnessed in people managers, followed by 10.5 per cent in individual contributors and 9.9 per cent in function heads.
Among executives, the attrition was the least at 9 per cent.
The top three reasons for voluntary attrition in India were external inequity of compensation, limited learning and growth opportunities, and performance assessment.
Among sectors, the highest attrition was recorded in professional services (24.2 per cent) and information technology (23.3 per cent).
"Attrition rates exhibited indications of slowing down, bolstered by an improved availability of talent," the report said.
