Corporate India will get a salary increase in single digits this year at 9.5 per cent, according to the Salary Increase Survey by Aon Hewitt, the global talent and health business of Aon plc.
This is a minor drop from last year when the average pay hike was 10.2 per cent.
"Political changes and economic headwinds have had an impact on business performance. However, the trend this year reflects a gradual slowing of pay increases and higher emphasis on productivity and performance - quite literally a 'graying' of salary budgets for India," said Anandorup Ghose, Partner at Aon Hewitt India at the report launch.
However, the top talent need not worry during this appraisal cycle. Firms will continue to invest in critical skills and high performers as their key talent segment. Their salary increase will be almost 1.6 times more than average employees.
This shows a change in the approach of companies where they are managing compensation cost by giving average salary increase to middle performers and transferring the benefit to key talent, commented Ghose.
"The last year has shown organisations take a strong view towards performance differentiation and not only have bell curves become sharper, the pay differentiation between top and average performers has also increased."
The surveys shows a 10 per cent increase in the optimism in the business sentiment. This is seen across sectors that continue to project a double-digit salary increase for 2017-such as Life Sciences, Professional Services, Chemicals, Entertainment Media, Automotive and Consumer Products-though they have taken a drop from their actual spends in 2016.
The attrition rate in India was lowest in the last five years at 16.4 per cent. One main reason for that is there wasn't any new industry that is the net attractor of talent and it led to the decrease in attrition, said Ghose. However, the attrition of key talent has increased by over 1.5 times.
The study analysed data across 1003 companies from 20 industries between December 2016 to January 2017.