Business Today

Happy days are here again

Salary hikes are likely to be hefty this year, thanks to a buoyant economy.

Print Edition: April 3, 2011

Riding on the back of a buoyant economy and stable business outlook, the Indian salaried class can expect substantial raises across sectors this year. A study by Aon Hewitt, a global HR consultancy firm, estimates salaries will increase by an average of 12.9 per cent in 2011, with double digit hikes (12-15 per cent) continuing for the next few years. At this rate, India will be giving the highest pay hikes in the Asia-Pacific region this year, superseding booming economies like China (nine per cent) and the Philippines (seven per cent).

The biggest pay hikes will go to employees in the engineering, automotive and energy sectors with increments of as much as 14 per cent, followed by infrastructure, FMCG, pharmaceuticals, banking and financial services and insurance, telecom and retail.

Even as the salaries will increase at all levels, junior managers or supervisory staff - employees with two to seven years of work experience - are expected to gain the most: 13.3 per cent on average. The Hewitt findings, based on a survey of 531 organisations in 18 primary and 30 secondary industry sectors, says: "Traditionally, salary increases are directly linked to the level of economic activity and talent demand and supply. But this year, rising inflation is also playing a significant role in determining salary increases."

According to the report, the positive growth estimate is due to a sustained increase in domestic consumption, investment in infrastructure, continued momentum in services and efforts towards fiscal consolidation. Relaxed foreign direct investment, or FDI, norms, increasing public-private partnerships, and state investments and stimulus to the energy and infrastructure sectors have also added to the robust outlook.

However, the booming IT and ITeS sectors that have backed India as the global business destination are still cautious being largely dependent on developed markets like the US and Europe for their business. The economic recovery in the West remains fragile.

"Salaries in the IT sector are already high compared to other sectors. Salary hike is purely a function of affordability. The billing rates (of IT companies) have been stagnant for the last few quarters. Unless the rates go up and revenue productivity improves, there will be pressure on controlling costs," says Nandita Gurjar, Senior Vice President, Infosys Technologies. "But that, however, does not mean that the industry will become less competitive."

The auto sector, which has seen healthy growth with an increase in demand for vehicles over the last two quarters, is also positive but cautious. "The increments this year are going to be in the range of 12 to 14 per cent. While companies in the sector are experiencing robust growth right now, there is caution due to the political unrest in West Asia, which has caused turmoil in the oil sector," says S.Y. Siddiqui, managing executive officer (HR), Maruti Suzuki.

Manu Kaushik

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