Backed by growth in pharmaceutical, high tech, and consumer products sectors amid the Covid-19 pandemic, India is set to see a median increase in salaries of 7 per cent in 2021, the highest among key Asia Pacific markets, according to a survey. However, the average salary growth in 2021 is projected at 6.4 per cent.
This is slightly lower than last year, when the median increase was 7.5 per cent and average was 5.9 per cent, the latest Salary Budget Planning Survey by Willis Towers Watson has found.
Compiled by the NASDAQ-listed Willis Towers Watson’s Data Services Practice, the survey, conducted online in October and November, received over 18,000 responses from 130 countries. Among key markets in Asia Pacific, India is followed by Indonesia (6.5 per cent), China (6 per cent), Philippines (5 per cent), Singapore (3.5 per cent) and Hong Kong (3 per cent) in terms of median growth.
According to Rajul Mathur, consulting head – talent & rewards, Willis Towers Watson India, there is increased optimism on business recovery even as Indian companies respond to the economic implications of Covid-19. However, that is yet to translate into the salary increment budget.
“With compensation budgets lower than previous years, companies are likely to prioritise allocation towards protecting critical and high skilled talent. Through 2021, we can continue to expect greater emphasis on pay for performance and pay linked to business output,” Mathur added.
Three sectors – pharma, high tech and consumer products – are projected to spur salary growth in India as they are expected to perform relatively better and offer better hikes. “All sectors witnessed varying levels of impact due to Covid-19. Some sectors such as hospitality, aviation, travel and tourism were hit harder than others. Sectors such as pharma, FMCG, e-commerce and high tech have experienced growth and this is reflected in their hiring plans and salary budgets for 2021,” said Arvind Usretay, director, rewards, Willis Towers Watson India. As a result, high tech, pharmaceuticals, and consumer products & retail are projected to see a higher median increase of around eight per cent.
Among other sectors, chemicals (7.4 per cent), financial services (7 per cent), and manufacturing (7 per cent) are projected to see a higher increase in 2021 than others like BPO (6 per cent). The energy sector, however, is expected to see the lowest increase of 4.6 per cent.
The projected salary rise also comes on the back of 37 per cent of surveyed companies in India projecting a positive business revenue outlook for the next 12 months, up from 18 per cent in Q3 2020. But, despite a comparatively optimistic projected business outlook, recruitment is yet to pick up. The survey has found that only 10 per cent of the organisations in India plan to add new headcount compared to 14 per cent last quarter.
Indian companies are also expected to reward top performers much better than other employees. On average, 20.6 per cent of the salary increase budget is being allocated to top performers, who represent 10.3 per cent of the employees. In other words, for every Rs 1 allocated to an average performer, Rs 2.35 is allocated to a top performer, and Rs 1.25 is allocated to an above average performer.
In terms of management and performance level, median salary increase at the executive level for 2021 is projected at seven per cent, a slight decline from 7.1 per cent the previous year.
For middle management, professional and support staff, the salary growth in 2021 is projected at 7.3 per cent, down from 7.5 per cent in 2020, whereas that for employee group of production manual labour is projected to be 7.2 per cent, compared with 7.7 per cent last year.
The trends across management and performance levels is being driven by the changing virtual work environment, said Mathur. “Unprecedented change linked to an increasingly virtual work environment has brought to the fore the role of distributed leadership. Organisations should evolve structures to identify, recognise and reward leaders who have demonstrated the ability to lead change and positively impact engagement and productivity,” Mathur added.