92% companies to give salary hikes; increments to jump to 7.3% from 4.4% in 2020: Survey

Kolkata: Average increments for India Inc are expected to go up to 7.3% from 4.4% in 2020, with 92% companies planning to give increments in 2021, compared to only 60% in 2020, says the 2021 Workforce and Increment Trends Survey (Phase 1) by Deloitte Touche Tohmatsu India.

More employees are also likely to get double-digit average increments, with 20% percent companies planning to give them in 2021, compared to only 12% in 2020, in line with the faster-than-expected economic recovery, revival in business and consumer confidence, and early signs of improving corporate profitability,

This 7.3% projected increment, however, is lower than the 8.6% average increment in 2019. “While business activity is rebounding quickly, organisations are managing compensation budgets responsibly considering their affordability and sustainability of fixed cost increases,” said Anandorup Ghose, partner at DTTILLP.

The survey also found that of 60% companies that gave an increment in 2020, a third of them did that through off-cycle increments. Of the companies that did not give an increment in 2020, only about 30% plan to compensate employees for the previous year through higher increments and/or bonuses.

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“Post March 2020, most companies decided either not to offer increments or defer them until they got more clarity. About 25% companies even extended a pay cut to senior management. Organisations largely preferred saving jobs of most to offering higher increments and bonuses to a few. Given that the risks related to the pandemic are not over yet, it is no surprise that they are treading with caution,” added Ghose.

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The study finds that every sector is expected to give a higher increment in 2021 compared with the year gone by. The life sciences and Information Technology (IT) sectors are expected to give the highest increments, whereas the manufacturing and services sectors continue to offer relatively lower salary increases. Life sciences is the only sector that will be able to match its 2019 increment levels.

Only digital and e-commerce companies are expected to offer double-digit average increments in 2021. Increments are likely to be the lowest in hospitality, real estate, infrastructure, and renewable energy companies.

Other key findings:

Organisations continue to use individual performance to differentiate increments across employees with top performers expected to get 1.7 times the increment given to employees who “meet expectations”. However, companies expect to place fewer employees in the “below expectations” category this year. The percentage of employees expected to be promoted is likely to increase from 7.4% in 2020 to 10.2% in 2021. Average additional increment to promotees is expected to go up from 5.4% in 2020 to 6.9% in 2021.

The survey found that, while at an all-India level, voluntary attrition reduced from 14.4% in 2019 to 12.1% in 2020, involuntary attrition (layoffs, restructuring, etc.) increased from 3.1% in 2019 to about 4% in 2020. Involuntary attrition increased the most in the IT and services sectors, whereas voluntary attrition reduced across sectors.

The 2021 Workforce and Increment Trends Survey was launched in December 2020 as a B2B India-specific survey. About 400 organisations participated in this edition spread across seven sectors and 25 sub-sectors.

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