Deloitte survey pegs average salary increment in India at 8.6% in 2022

Early estimates peg the increase higher than 8% in 2021, 4.4% in 2020

On the back of economic recovery and improved confidence, the second phase of Deloitte’s Workforce and Increment Trends survey 2021 has pegged the average salary increment in India at 8.6 per cent, up from eight per cent for 2021 and 4.4 per cent in 2020.

Early estimates reveal that average increment for 2022 is expected to increase to 8.6 per cent in line with a healing economy and improving confidence.

According to the survey findings, 92 per cent companies gave an increment in 2021 at an average of 8.0 per cent compared with only 4.4 per cent in 2020, when just 60 per cent of the companies had extended a pay hike. The Deloitte survey stated that if salary growth reaches 8.6 per cent, then the increments in 2022 would reach the pre-pandemic levels of 2019.

About 25 per cent of the companies surveyed have projected a double-digit increment for 2022.

While most companies are projecting a higher increment in 2022 compared to 2021, the market continues to operate in an environment where Covid-19 related uncertainty persists, making it harder for firms to forecast, said Anandorup Ghose, partner, Deloitte Touche Tohmatsu India LLP.

"Some of the survey respondents have also just closed their 2021 increment cycle, so 2022 increments are a fair distance away for them. GDP forecasts for FY22 were revised down after the second wave and we expect organisations to closely watch similar developments while managing their fixed cost increases next year," said Ghosh.

Sector-wise, Information Technology (IT) is likely to offer the highest increments, followed by life sciences. IT is the only sector expected to extend double-digit increments with some digital/e-commerce companies planning to give some of the highest increments.

Retail, hospitality, restaurants, infrastructure, and real estate companies continue to project some of the lowest increments in line with their business dynamics. Not all employees are expected to get the same increment as organisations continue to differentiate pay increases by skills and performance. Top performers can expect about 1.8 times the increments given to average performers.

According to Anubhav Gupta, partner, Deloitte Touche Tohmatsu India LLP, organisations are trying to balance employee cost with what is best for their employees in what has been a difficult couple of years for many.

"Going forward, function specific increment differentiation may become more prevalent as attrition rates vary significantly across different skills. Compensation is usually one of the top reasons for attrition, particularly at a junior management level, where virtual hiring has made it easier to jump ships," said Gupta.

About 12 per cent employees were promoted in 2021 as compared to 10 per cent in 2020. Almost 12 per cent of firms have updated their bonus or variable pay plans to align their rewards structures with changing priorities. With respect to hiring, 78 per cent of the companies said they have started recruiting at the same pace as they used to prior to Covid-19.

In other findings from the survey, only 25 percent of companies have conducted an employee preference survey to decide their return to work strategy.

"The IT sector has been the most proactive in assessing employee preferences with regards to the desired workplace. In most cases where such a survey was conducted, employees seem to prefer a hybrid work arrangement (combination of work from home and office, wherever feasible). However, at an all India level, only 40 percent organisations have finalised their return to work strategy," the survey found.

While most organisations have not finalised their return to work strategy, almost 90 percent organisations said that they are likely to finalise a hybrid model in future. Providing permanent flexibility to the employees on when and how much to opt for work from home was not a popular choice, however.

Approval from line managers or setting limits on the number of days working from home were the more common alternatives preferred by companies. As a result, just one percent of the organisations are likely to use an only work from home model while 88 percent are not planning to allow their employees to work from any location on a permanent basis.

"Previously, the organisations used to decide who can work from home; they are now deciding who can or should work from the office. While the hybrid model seems to be the preferred choice, there are critical questions about employees’ health and safety, flexibility and choice, governance, data security, business continuity, collaboration, team work and culture that need to be carefully thought through before finalising a robust return to work strategy," Ghose added.