Talent crunch forces India Inc to hike salary

Despite the slowdown and turmoil in financial markets, private sector employees have received or can look forward to an average salary increase of 15 per cent this year, roughly the same as the year before but lower in real terms because of the inflation rate, which is ruling at 8 per cent.

Still, this is better than most markets "� 5.5 per cent in the US and 8 per cent in China, for instance "� mainly thanks to the talent crunch and rapid growth in many sectors.

"Given the slowdown, companies are being cautious. Average increases will be 7 to15 per cent though top performers will still get 25 to 30 per cent, '' said K. Sudarshan, managing partner (India) for executive search firm EMA Partners International.

HR firm Hewitt Associates, however, estimates average salaries in India rose 15.2 across sectors for 2008-09 in line with the increases last year (15.1 per cent) and better than the year before (14.4 per cent) despite slowdown in many sectors.
 

PAYBACK Top performers in terms of salary increases (Figures in %)
Sectors	2007	2008
Real estate & infrastructure	28-29	25.0
Telecommunications	17.2	17.6
Oil & gas exploration, energy	19.0	17.5
Hospitality, restaurants	15.4	17.1
Banking & fin services	12.9	16.9
Manufacturing	14.2	14.4
IT-enabled services	11-12	14.0
Source: Hewitt Associates' estimates

 ''The growth in salaries is due to lack of talent in the market while companies are growing at a fast pace (30 to 35 per cent in telecom, retail). The supply is not keeping pace with the demand. There's a 10 to 15 per cent shortage of talent across various levels,'' said Nitin Sethi, consulting leader, South Asia, Hewitt Associates.

At 15.5 per cent, salaries of people in junior management (up to seven years) rose the fastest, followed by middle management (seven to 12 years) at 15.2 per cent, senior management (12 years+) at 14.5 per cent while salaries of CEOs increased 13.6 per cent.

Some experts had predicted that salary increases will moderate but fast-growing organisations have not been able to control salary increases as the demand-supply situation hasn't changed much, pointed out experts.

Unlike in developed countries, where the increases are linked to inflation (if inflation is 2 per cent, the increases are 3 to 4 per cent), in India there's no such link.

For instance, take 2002-03, when inflation in India was 3 to 4 per cent, but the average salary hike was around 12 per cent, HR experts point out.

Salary increases are generally driven by the demand-supply scenario (shortage of talent) and the need for additional people thanks to rapid growth. With salaries rising sharply in the last few years, companies are doing their budgeting more carefully and opting for a higher percentage of variable pay (12 to15 per cent). "Average salary increases are keeping pace with inflation but are a bit lower than last year's, " is all that Bruce Ashby, CEO for Indigo Airlines, is willing to say.

"Talent acquisition and retention is a key focus for us. We offer competitive packages, and our average salary increases this year were between 14 and 15 per cent,'' said a spokesman for GE Money.

Five years back, there was a huge gap in salaries between India and what many could earn in West Asia.

"Gaps have to come down vis- à -vis what people earn globally. Salaries have to be very competitive. In retail, for instance, many Indians working abroad want to come back. So, companies need to benchmark globally, '' added Marcel Parker, chairman, IKYA Human Capital Solutions, a new firm started by HR professionals.