Deloitte in India, Human Capital Advisory Services (HCAS) recently concluded a crossindustry compensation trends survey that provided key insights on salary increments and variable pay trends. According to the survey, the median salary increment across sectors is projected at 11.3 per cent, with highest increments in the pharmaceuticals, healthcare and life sciences sectors at 13.1 per cent. The survey also states that this year, India witnessed a further drop in increment figures as compared to last year.
So, are organisations being a little cautious while doling out increments this year? Why have increment figures dropped? According to Thiruvengadam P, senior director, human capital advisory, Deloitte in India, “Macroeconomic issues such as high public expenditure, depleting investment and saving levels, worsening current account balance as well as depreciation of the rupee have added to the present economic pressures, thus overshadowing positive aspects such as moderation in inflation and recovery of stock markets during the year. In addition to this, the
Indian economy is currently going through a challenging phase with GDP growth slowing down to nearly a decade low in 2012-13 with domestic as well as external factors playing a part in this downfall. This has mirrored the overall performance of most sectors with industries now being conservative with their outlook to increments. Most organisations across sectors are opting for higher variable pay percentages rather than increases in the fixed pay of employees – thereby reducing their fixed operating costs and risks.”
Sharing his views on the report, Amit Das, senior vice president, group HR, RPG Enterprises points out, “I think the average pay hike will vary to quite an extent based on nature of the industry and company as well as individual performances within the same sector and organisation respectively. The industry is yet to fully come out of the volatile and uncertain economical and political environment, due to which companies will be cautious with their salary increase plan for 2013. Organisations will focus on cost-optimisation and operate within a tighter budget. Hence, I foresee the average increase to be lower than 11.3 per cent being projected in the report.”
Pragya Kumar, head – HR, Yatra.com shares that it wouldn’t be wrong to say that the average hike would be around 11-12 per cent this year attributable to the prevalent market sentiments. “While making such recommendations on salary increments, organisations do take into consideration factors like interest rates, inflation and economic growth, which unfortunately have been sluggish. Thus, the percentages will vary from industry to industry and actual increments will be based on the ‘pay for performance’ mantra across all the industries,” she explains.
As per the report, some industries will be doling out decent increments while some will be lagging behind. “From the different market benchmark reports, it seems that sectors like pharma, oil & gas, chemicals, and FMCG sectors will fare better than the others, while some sectors like infrastructure, real estate and IT may show a dip in their increments compared to last year,” informs Das.
According to Thiruvengadam P, industries which are giving good hikes include pharmaceuticals, and energy and resources. “Increments in pharmaceuticals have been high because the sector has been growing rapidly over the last few years. The domestic pharmaceutical market is expected to grow at a fast pace of 13-14 per cent in 2013. Given this exponential growth that has both been witnessed and is expected to continue, organisations have been generous with their increments. India’s power and oil and gas sectors are expected to undergo major expansion, as the country’s energy sector gears itself to sustain economic growth rates of above six per cent over the next five years. Again, given this rapid growth prediction, the energy sector is incentivising the talent pool to retain it better and attract qualified talent as well,” he shares. In terms of industries not really being generous in increments, Thiruvengadam P further points out that financial services, logistics, consumer business and retail are sectors that would lag behind due to an overall slowdown in the country.
The report also points out that the overall average attrition rate across industries is 14 per cent. Better career opportunities and better pay have been cited as key reasons for attrition across most sectors. Hiring and retaining skilled talent have been identified as perennial challenges for organisations. “In the current economic environment, organisations are working to retain their critical talent and this in turn makes lateral hiring of this critical talent difficult,” shares Kumar.
According to Thiruvengadam P, the entry of many foreign
players into the market across sectors has increased job opportunities, especially at the junior management level, thus allowing easy movement of the workforce. “Employees are also leaving for better pay elsewhere as well as for personal reasons and better work-life balance. While pay will always be a challenge, now a greater need for worklife balance is being felt by employees across organisations,” he says.
Das further points out that organisations will continue to focus on managing the talent supply chain in order to ensure business continuity. Hence, companies need to reinforce a differential reward structure and adopt a reward policy and approach to retain their key top talent who generate more than their share value for the business and shareholders.
Hence, with conservative estimates on increments this year, companies need to manage aspirations and build careers as a part of their value propositions to attract and retain top talent.
Source :The Economics Times.
Date : 07/05/2013