In the next few weeks, business and talent managers in India Inc will get into huddles to squeeze out increment budgets for their firms for 2013. But early signals tracked by at least two HR agencies suggest the continuing economic lethargy will result in employees taking home pay hikes that may be less than 2012 levels.
“Investments have been slow, projects are on back burners and business is a challenge. While the mean for this year’s increment was 10-12 per cent, it will be a mere 8-9 per cent in the next one,” says Ganesh Shermon, KPMG India partner and country head (human capital).
Salary increments in 2013 are expected to be 10.6 per cent on an average across sectors, a marginal drop compared to an 11 per cent raise in 2012, says Anandorup Ghose, practice head for executive compensation and corporate governance at consulting firm Aon Hewitt.
If these forecasts come true, increments next March may be the lowest in four years. The worst year though was 2009, when hikes were just 6.6 per cent.
KPMG’s Shermon said some companies may increase bonus component in salaries, but will reduce any form of guaranteed payments. Increments in infrastructure, IT, real estate and manufacturing will be less than last year while BFSI, pharma, retail and telecom will see marginal increases.
“The government has taken some positive decisions, but it is too early to gauge when things will improve. Increments may be on a par with 2012 when it ranged between 5-7.5 per cent, or even lesser,” says Adil Malia, group president (HR), Essar Group. “People are still evaluating how the markets will turn.”
But firms do not fear that talent will be upset with lower hikes. “Employees are well aware of the economic situation, so they are mindful that it will impact industry as well,” Malia adds.
The IT sector is expected to lay low in the new year as well and make its performance rating systems more competitive. “The increments will be around 6 per cent for the IT sector and we will not give a standard raise anymore,” said the HR head of a mid-tier IT company. He did not wish to be named.
Therefore, only if someone gets a rating of 3 and above (on a scale of 1 to 5) will he/she get an increment in the coming year,” he added. Given the cautious overall environment, even companies that have outperformed the market are taking it easy.
Panasonic, with a 40 per cent-plus revenue growth over last year, is planning to pay out average increments of 12-13 per cent on an average in the upcoming appraisals as compared to an average of 15 per cent in 2012. Says Prashant Deo Singh, head (HR & general affairs), Panasonic India: “Over the past 2-3 years, we have benchmarked ourselves against competition. In 2013, most companies in our sector will be paying out increments in this range. Since we have already done salary corrections over the past two years, so will we.”