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The big freeze

The big freeze

With lower salary hikes and slow hiring predicted across sectors, pay for performance is set to be the norm for the new year.

Average salary increase across sectors
Industry20082009 (projected)
Figures in %; Source: Hewitt and Future Group
What does Bollywood actor John Abraham have in common with Saroj Dutta, executive director of Jet Airways, and Arijit Sen, an analyst with a global consulting firm? All of them will take a salary cut in 2009. While Abraham, along with most other leading actors, has reportedly cut his fee by 50%, the top management of Jet Airways has taken a voluntary cut of 25%. Sen is luckier. “We received an email from our CEO, saying that our base salaries had been frozen but that we’d still get a bonus depending on our performance,” he says.

Whichever way you look at it, 2009 seems to be a year of gloom and doom. There are surveys and soundbytes galore about hiring freezes and zero pay increments next year. According to the Watson Wyatt survey, in the next 12 months, 51% of Indian employers expect slower rates of salary increase. Unfortunately, no sector will be entirely insulated. The good news is that the extent of bad news will vary from sector to sector. As Oscar De Mello, country head, Reward Information Services, India, Hay Group, puts it, “Everyone feels the heat, but in varying degrees.” For example, retail is the hardest hit due to reduced consumer spending, while oil and gas firms have weathered the downturn better.

With India Inc. scrambling for ways to reduce the pressure on its bottom lines, pink slips are becoming more common. But given that a job cut is generally frowned upon, most companies are hoping to cut corners by reducing their budgets for the projected salary hikes. A recent Hay Group survey claims that the number of companies considering decreasing or freezing pay hike budgets has doubled since March 2008, when a similar study was conducted. The Hewitt Salary Increase Dipstick Study reveals that India Inc. has lowered the average salary hike projections for 2009 by one percentage point compared with 2008.

Average salary increase for staff
Hierarchy20082009 (projected)
Top management12.211.7
Senior staff13.712.7
Middle level14.613.8
Junior level15.214.4
General staff14.413.2
Figures in %

Since a salary cut is demoralising for employees, companies are opting to restructure the pay packet. In the Hewitt survey, 30% of the organisations surveyed claim that they have increased performance linkages to counter fixed pay increases, while only 4% mentioned a promotion freeze. So the rule of thumb now is pay for performance. That is why the variable component of the pay packet is going up across all levels from senior management to manual workforce. In some sectors like insurance, the variable pay to fixed pay ratio can go up to 50:50. The only trouble with this picture is that the bonus may not materialise, with the firm simply citing that the “performance was not up to the mark”.

Even if you are among the lucky few who are sure to land a decent bonus, your professional lifestyle is sure to be hit in the coming year. India Inc.’s cost-cutting drive has pruned staff budgets. So, the question companies face is not so much a job cut or a salary cut but to travel or not to travel, hotels or guesthouses, off-sites or in-office parties. Says Sandeep Chaudhary, leader of Hewitt’s rewards consulting practice in India: “Contrary to expectations, there hasn’t been any dramatic move to downbeat macroeconomic factors on compensation. Instead, companies are looking at innovative ways to cut costs without compromising on salaries.”

The silver lining is that your efforts in this financial year won’t be ignored. The Hay survey indicates that there will be no reduction in the short-term variable pay like incentives and bonuses as these have already been accrued. If you aren’t happy with your salary, we have two suggestions—grin and bear it, as landing a better-paying job at the moment seems iffy, or go back to school. An additional degree will boost your employability quotient and keep you out of the maelstrom till the job market stabilises.

A look at how various jobs measure up in terms of pay and opportunity

With a net hiring of 500 people a month, the scramble for talent makes this sector the only one promising fatter salaries.

offers from the manufacturing and infrastructure sectors in engineering colleges is at least 20% higher than in 2008. It’s the current campus favourite.

New projects and drugs in the pipeline portend a strong demand for recruits and the bait is competitive salaries.

With India Inc. in a panic, there is enough demand. Then there are sunrise sectors like tax consultancy and security. The latter is expected to grow 125% by 2012.


Forget about hiring, airlines are looking for excuses to fire staff. You can’t negotiate a higher salary either.

According to Nasscom, the average growth in increment will fall from last year’s 13-14% to a single-digit figure. Recruitment has slowed down too.

Recruiters say that hiring will be flat for a while as the sector has been badly hit by a credit squeeze and tight-fistedness.

Real estate
Biggies like DLF are laying off people and fresh recruitment depends on the number of contracts developers bag.

Published on: Dec 23, 2008, 11:31 AM IST
Posted by: AtMigration, Dec 23, 2008, 11:31 AM IST