Aon Hewitt Projects 10.6% salary increase for India Inc in 2015

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Aon Hewitt, the global talent, retirement and health solutions' business of Aon plc has projected a 10.6% salary increase for India Inc in 2015. In its Annual Salary Increase Survey in India, Aon Hewitt said that about half of all companies feel that positive business sentiment and increasing pay budgets in their competitive market are driving factors in their decision to increase salary projections from earlier years.

The study analysed data from more than 580 companies. The results reflect a positive yet cautious sentiment in India Inc. towards salary increase.

Anandorup Ghose, Rewards Consulting Practice Leader at Aon Hewitt India said, “The projected salary increase number shows a subtle improvement over salary increases in the last three years. Companies across industries are continuing to take a cautious stance and are not going for aggressive pay increases.”

Sectors such as life sciences, engineering services, chemicals and media are projecting a higher increase than the market average. These industries have also consistently led the salary increase numbers since 2012. The overall positive sentiment in the economy has impacted the real estate & infrastructure sector significantly. The sector has moved up many places to lead the salary increase pack this year. Services industries like retail, financial institutions, and hospitality represent the lower end of salary increase projections.

With changing sentiments, employee expectations have also gone up manifold. The study results show that organizations however are managing these higher expectations carefully and are not getting swayed by it. The focus on performance differentiation is far higher with a larger proportion of budgets being allocated to higher performers.

Highest & Lowest Salary Increase Projections for 2015
Lead Industries	2015 Projections	Lag Industries	2015 Projections
Real Estate Infrastructure	12.2	Telecommunications	9.9
Life Sciences	12	Transport	9.9
Media	11.8	Hospitality	9.8
Chemicals	10.8	Retail	9.5
ITeS and Hi Tech	10.7	Financial Institutions	9.4
Source: Aon Hewitt Salary Increase Survey 2014-15

Data this year shows that across the board top performers are expected to get 1.6 times the salary increase awarded to average performers. This differentiation is even higher in most service industries such as Banking and other Financial Services (BFSI), ITeS and Telecom as well as other industries like Fast Moving Consumer Goods/Fast Moving Consumer Durables (FMCG/ FMCD), Pharma etc.

Additionally, in the last five years, the percentage of employees with top performance rating has dropped by close to 30%, implying that organisations are not hesitating to differentiate sharply on the basis of performance and are allocating the share of the total increase budget accordingly.

Top/Senior Management will see approximately a fourth of their total compensation being variable and even the bottom of the pyramid, at entry levels roles, more than 12% of compensation can be expected to be paid through performance-linked pay. There is a steady trend towards greater performance-based pay and it indicates a shift in overall pay philosophy across Indian companies.

India Inc's attrition rates in 2014 continued to be broadly at par with 2013 at 18.1%, but key talent attrition has witnessed a 31% jump. Key talent attrition in 2014 registered at 5.9% as compared to 4.5% in 2013.

The survey said that with changing demographics and increased focus on employee wellness, benefits are gaining significant momentum. Of the 500 plus organisations that were surveyed, 76% of the firm has indicated an increase in their benefits budget. Increase in salary linked benefits (retirals), introduction of new benefits and change in the number of people availing benefits are some of the reasons for this increased budget.