Global professional services firm Aon's 25th Annual Salary Increase Survey in India finds that companies in India are projecting a 7.7 per cent increase in average salary in the year 2021. This is up from the actual increase of 6.1 per cent in 2020. The survey, which analysed data across 1,200 companies from more than 20 industries, finds that while salary increments indicate strong recovery, the Code of Wages could be a gamechanger.
Eighty-eight per cent of the surveyed companies reported that they intend to increase salaries in 2021, reflecting positive business sentiment. "There is a much higher percentage of companies projecting increments in the 5-10 per cent range as compared to 2020," the survey reveals.
Results for Aon's 25th Annual Salary Increase Survey 2021 - India are out now!— Aon India Consulting (@Aon_India) February 23, 2021
With data from over 1200 organizations across 38 industries, this is the biggest and most comprehensive salary study in India.
Take a look at the results for 2021.#SalaryIncreaseSurvey#SISpic.twitter.com/KZyQUbPR3n
Roopank Chaudhary, the partner in Aon's human capital business in India, said the highest-paying sectors in 2021 continue to be the ones from last year -- information technology, IT-enabled services, life sciences, e-commerce and fast-moving consumer goods.
Employees in e-comm, VC-backed companies are likely to get the highest average increment at 10.10 per cent, followed by hi-tech IT companies with 9.70 per cent. The IT-enabled companies are likely to give average increment at 8.8 per cent, followed by gaming or entertainment industry and chemicals at 8.10 per cent and 8 per cent, respectively.
"It's notable that the sectors that were adversely impacted by COVID-19, such as retail, hospitality and real estate, are projecting healthy increases in the range of 5-6 per cent. Such numbers reflect their intent to stay relevant and to control attrition, which had increased for these industries last year," he added.
Roopank said it is also possible that some of the salary increments may not translate into higher cash-in-hand for employees if organisations choose to pay higher provident fund contributions on the new definition of Wages.
Despite a tough 2020 with stringent lockdowns, India continues to project the highest salary increases among the BRIC nations.
The survey reveals that most sectors may give better pay hikes in 2021 than in 2020. As coronavirus continues to impact lives, variable pay may, however, see a decline to 13.2 per cent in 2021 from 16.1 per cent in 2020.
These uncertain Covid times have also led to a low attrition rate as employees shied away from switching jobs. The attrition rate in 2020 stood at 12.8 per cent from 16.1 per cent in 2019.
Nitin Sethi, partner and CEO of Aon's performance and rewards business in India, said the increment dynamics for 2021 will play out over a longer period given the uncertainty and potential impact of forthcoming changes.
"The proposed definition of wages under the new Labor Codes could lead to additional compensation budgeting in the form of higher provisioning for benefit plans like gratuity, leave encashment and provident fund," said Nitin.
He expects organisations to review compensation budgets in the second half of the year once the exact financial impact of the Labor Codes is known.