India Inc likely to give 7.3% average salary hike in 2021

As many as 92 per cent companies that participated in a survey plan to give an increment in 2021 compared to only 60 per cent last year.

Companies in India are expected to dole out an average increment of 7.3 per cent to employees this year amid faster-than-expected economic recovery and revival in business and consumer confidence, according to a survey.

The first phase of the 2021 Workforce and Increment Trends Survey by Deloitte Touche Tohmatsu India LLP (DTTILLP) also said the average increment this year will be higher than 4.4 per cent seen in 2020 but lower than 8.6 per cent given by companies in 2019.

As many as 92 per cent companies that participated in the survey plan to give an increment in 2021 compared to only 60 per cent last year.

The survey, launched in December 2020 as a B2B India-specific survey, covered around 400 organisations spread across seven sectors and 25 sub-sectors.

"Average increment for companies in India is expected to go up to 7.3 per cent from 4.4 per cent in 2020.

"This 7.3 per cent projected increment is lower than the 8.6 per cent average increment in 2019.

"The increase in increment budgets is in line with the faster-than-expected economic recovery, revival in business and consumer confidence, and early signs of improving corporate profitability," it said.

As per the findings, 20 per cent companies plan to give a double-digit increment this year compared to only 12 per cent in 2020.

Out of the 60 per cent companies that gave an increment in 2020, a third of them did that through off-cycle increments.

Among the companies that did not give an increment in 2020, "only about 30 per cent plan to compensate employees for the previous year through higher increments and/or bonuses," it added.

The survey further said the life sciences and information technology (IT) sectors are expected to give the highest increments whereas the manufacturing and services sectors continue to offer relatively lower salary increases.

"Life sciences is the only sector that will be able to match its 2019 increment levels.

"For others, average increment in 2021 is expected to be lower than 2019.

"Only digital and e-commerce companies are expected to offer double-digit average increments in 2021.

"Increments are likely to be the lowest in hospitality, real estate, infrastructure, and renewable energy companies," it added.

Anandorup Ghose, partner at DTTILLP, said COVID-19 has made year-on-year analysis tricky as 2020 has been an anomaly, making 2019 a better year for comparison.

Average India 2021 increment of 7.3 per cent is still considerably lower than 8.6 per cent in 2019.

While business activity is rebounding quickly, organisations are managing compensation budgets responsibly considering their affordability and sustainability of fixed cost increases, Ghose noted.

According to him, post March 2020, most companies decided either not to offer increments or defer them until they get more clarity and around 25 per cent companies even extended a pay cut to their senior management.

"... at an all-India level, voluntary attrition reduced from 14.4 per cent in 2019 to 12.1 per cent in 2020, involuntary attrition (layoffs, restructuring, etc) increased from 3.1 per cent in 2019 to about 4 per cent in 2020.

"Involuntary attrition increased the most in the IT and services sectors, whereas voluntary attrition reduced across sectors," it added.

Among priorities for 2021, most organisations identified greater adoption of technology in HR, employee wellness, and continued investment in learning and development as the top three focus areas.