Weak market, low salary budget to keep average increment flat at 9.7%: KPMG

Says e-commerce reported highest increment of 12.5% and logistics reported lowest at 8.1%

The average increment for the year 2017-18, is expected to remain almost flat from last year at 9.7 per cent, mainly driven by weak market performance and low salary budget, according to a KPMG survey.

"The projected increment for the 2017-18 is 9.7 per cent, a drop of 0.6 per cent from 2016-17. This is mainly because the markets have not done well last year, low salary budget, cost-cutting within companies and higher pay packets," according to KPMG's India's Annual Compensation Trends Survey.

The highest increment of 12.5 per cent is reported by the e-commerce sector, the lowest of 8.1 per cent is that of logistics, the survey said.

The decline was seen most in the banking and financial services sector, where financial services sector has decreased the increment from 9.7 per cent to 8.1 per cent, it added.

The survey was conducted among 263 companies across 19 sectors.

Average projected variable pay across sectors is 15.4 per cent, almost same as last year, just 0.4 per cent higher than that in 2016-17, the survey revealed.

The survey also found that the financial services sector reported the highest variable pay of 20.7 per cent while the energy sector reported at 10.1 per cent.

This indicated that organisations are continuing to move towards paying for performance, in which variable pay holds a higher percentage in the cost to company (CTC), the survey opined.

On attrition, the report said, the highest voluntary resignation of 20.4 per cent is reported by e-commerce, while the lowest of 8.1 per cent being reported by energy sector.

It said the top reasons for attrition are better pay elsewhere (28.1 per cent), better career opportunity (23.4 per cent) and personal reasons such as marriage, health among others (19.6 per cent).

Performance-based variable pay (19.7 per cent), Recognition awards (13.1 per cent) and retention bonus (11.8 per cent) are considered the top compensation levers for talent retention.

And for attracting talents the top reasons are benefits offerings (26.3 per cent), guaranteed incentives (19.4 per cent) and awards (16.6 per cent), it added.

"With the new generation of employees looking at more control, involvement in key decisions and a culture of feedback and communications, companies are realising they need to re-look the way they manage talent and performance.

"New Human Resource initiatives are being implemented and firms are testing waters to create an optimal performance management model," KPMG India Partner and Head, People and Change Advisory Services, Vishalli Dongrie said.