Salaries in India are projected to rise 10 per cent in 2020, marginally higher than the actual increase of 9.9 per cent in 2019, according to Salary Budget Planning 2019 report by advisory firm Willis Towers Watson.
The report is a biannual survey on salary movements around the world. The Q3 survey was conducted in July 2019 with 4,521 sets of responses received from 1,128 companies across 20 markets in Asia Pacific, including 337 from India.
While salary increases in India stand at around 10 per cent mark, it remains the highest in the Asia Pacific region. Indonesia is projected at 8 per cent, China at 6.5 per cent, Philippines at 6 per cent and Hong Kong and Singapore both at 4 per cent.
Rajul Mathur, Consulting Leader - Talent & Rewards, Willis Towers Watson India said, "Though salary increases in India still continue to be among the highest in the region, companies are taking a cautious approach and do not intend to make any significant changes from previous years."
This has a lot to do with scepticism around business revenue outlook. In India, 28 per cent of the surveyed companies feel positive about the business revenue outlook for the next 12 months, down from 37 per cent in 2018, whereas 61 per cent expect no big change as compared to 57 per cent last year. Besides, 11 per cent of surveyed companies have a downward revenue projection compared to 5 per cent in 2018.
The sobering perception will also lead to a slowdown in recruitment. The survey shows that only 22 per cent of organisations in India plan to add new headcounts compared to 29 per cent last year. Organisations planning to maintain their current headcount increased from 63 per cent in 2018 to 70 per cent in 2019, while 7 per cent are willing to reduce headcount compared to 8 per cent last year.
As a result, most salary increments will go to critical skills. Arvind Usretay, Director - Rewards, Willis Towers Watson India said, "Attracting and retaining the right talent at leadership positions is commanding higher pay increases as the leadership pool continues to be limited. The increase is mostly in terms of variable pay as there is greater focus on pay for performance."
Median salary increase at the executive level for 2020 is projected at 10.1 per cent. For middle management, professional and support staff, an increase from 10.1 per cent in 2019 to 10.4 per cent in 2020 is projected.
The strong shift towards variable pay is especially at senior management levels. The survey found out that variable pay component of compensation at executive level increased from 20.7 per cent in 2018 to 30.7 per cent in 2019.
On salary increases by performance levels, the survey found out that on an average 25 per cent of the salary increase budget is being allocated to top performers, which represents 11.5 per cent of employees in India. This implies that for each Rs 1 allocated to an average or below average performer, Rs 2.16 is allocated to a top performer compared to about Rs 1.3 last year.
"No longer are employers looking at compensation alone as a key attraction or retention driver. While compensation continues to be an important element, we are seeing a quiet re-emergence of 'employee benefits' underway. If the last decade was about compensation being the key differentiator, the next could well be about 'purpose led benefits'. With the employee now seen as a consumer, benefits will expectedly become more segmented, flexible and targeted," Usretay added.