COVID-19 caught the entire country off guard and businesses are still uncertain about their growth prospects. There are sectors such as essentials commodities, information technology, e-commerce that are growing, there are others like auto, aviation that are facing a looming existential crisis.
As businesses get impacted, they have gone into a cost-saving mode. "Pay increases have been slowing in India over the past few years in line with the trajectory of the economy and rising margin pressures. However, with COVID-19 pulling the global economy into a recession, organisations have had no choice but to reduce or halt increments as they evaluate every incremental rupee spent," says Anandorup Ghose, partner at Deloitte Touche Tohmatsu India LLP (DTTILLP).
But, there are many nuances in that. Rajiv Burman, Founder Director for HR consultancy GrowthSource says that the increments story this year for the corporate sector is that of two extremes. "Sectors that are doing well such as pharma, IT, ecommerce have given double digit pay hikes to keep their employees' morale high. Apart from these three sectors, where business is really hurting such as life insurance firms, there are no increments at all and at times it is in the negative, pay cuts or job cuts." He adds in the new normal, an average India Inc increment figure will not give the true story.
It is not just firms that are projecting muted growth and squeezing staff cost. Aditya Narayan Mishra, CEO of staffing firm CIEL HR Services says there are sectors that are not impacted such as telecom but are still not giving hikes. "Many companies are using this as an opportunity to ride on the market's negative sentiments and keep cost under check even if their business is not impacted so they can buy more time to figure out the impact of the COVID-19 pandemic on business," he says.
Mishra adds while many firms are not rewarding the entire organisation, they are adopting the differential reward strategy where they are paying high-performers and also employees who have a direct impact on the topline.
The 2020 Workforce and Increment Trends survey by Deloitte Touche Tohmatsu India LLP of 350 organisations found that only 4 of the 10 surveyed companies in India have given an increment in 2020 and 33 per cent companies have decided not to give an increment at all. The remaining organisations are still undecided.
From the organisations that gave an increment, the average increment in 2020 is 7.5 percent. Less than 10 per cent companies have given an increment equal to or more than 10 per cent in 2020 and the proportion of such companies has dropped drastically since the start of the lockdown in March 2020.
The survey points out organisations expecting a decline of more than 20 per cent in revenue in FY 2020-21 due to COVID-19 have given much lower increments. Increments were the highest in the life sciences sector and the lowest in the manufacturing and services sector, particularly in the real estate, construction, metals and mining, hospitality, retail, and automobiles industries. Even the digital/e-commerce industry, which is known for giving double-digit increments, has struggled to match its past figures.