Figure 1: Projected and actual salary increase

While salary increases in India are stabilising around the 10% mark, they remain the highest in the Asia Pacific region. Indonesia is projected at 8.3%, China at 6.9%, The Philippines at 6%, and Hong Kong and Singapore both at 4%.

Figure 2: Comparing India with key markets in the Asia Pacific region

Sharing his perspective on the findings, Sambhav Rakyan, Data Services Practice Leader, Asia Pacific, Willis Towers Watson said, “India continues to show high salary increments compared to other countries in the region and this can be attributed to the steady economic growth, progressive reforms and cautious optimism across sectors. However, workplace automation, artificial intelligence and robotics are expected to reshape a new combination of work, talent, skills requirements and work relationships. Organisations, therefore, should re-examine not just their talent strategies but also how they will remunerate and reward the workforce of the future”.

Commenting on how Indian companies are likely to approach salary increases as compared to MNCs, Rakyan added, “MNCs that typically have KPO/BPO or manufacturing operations in India will likely see average salary increases around the 10% mark, as in dollar terms this is not a significant increase to their cost of operations. However, Indian companies will likely see a lower salary increase which is more directly linked to their financial performance”.

About 42.6% of the total salary increment budget is being allocated to top or above average performers. On average, 17% of the salary increase budget is being allocated to top performers, which represent 13.1% of employees in India. This implies that for each $1 allocated to an average or below-average performer, $1.31 is allocated to a top performer.

Arvind Usretay, Director, Rewards, Willis Towers Watson India, explained, “The future of work is rapidly creating demand for niche and specialised skills, pushing companies to revaluate their total rewards programmes. Companies in India also depend heavily on base pay to drive performance and differentiation. This approach will likely be under pressure going forward, as the demand for sharper linkage between performance and pay grows further.”

The report identifies Technical Skilled Trade (48%), Engineering (45%), IT (39%) and Marketing (15%) as the top four areas for recruiting critical functions in the next 12 months.

“To elaborate on Technical skilled trade, for instance, as the Auto industry gears up to the Government push for electronic (green) vehicles, the demand for Li-Ion battery engineers continues to increase. Similarly, in the high-tech industry, demand for specific IT skills such as Machine learning, DevOps, UI/UX, Blockchain is expected to grow at the cost of generic skills,” Usretay added.

Salary increases by management level

Median salary increase for 2019 at Executive level is projected at 9.8%, a marginal increase from 9.7% in the previous year, and at 10% for mid management and production / manual labour, a drop from 10.1 %.

On the aspect of variable pay allocation, the report projects a decline across levels for 2019, with executive level variable pay declining from 20.7% to 17.4%, mid-management level from 12.6% to 10.2% and production/manual labour from 9.2% to 8.4%.The projected variable pay is conservative and a potential reason could be that only 37% respondents have projected a positive business revenue outlook for the next 12 months, as compared to 48% last year.

Sector trends

The Pharmaceuticals sector has the highest projected salary increase for 2019 at 10.3%. The salaries for consumer products and retail sector will remain consistent at 10% owing to the green shoots of recovery in the sector’s performance, increasing consumer confidence and purchasing power. Notably, the financial services sector, mainly comprising Banks, NBFCs and Insurance companies, has seen a steady increase from 9.1% in 2017 to 9.6% for 2019, largely due to improved performance, higher premium collections for insurance companies and regulatory reforms.

Figure 3: Industry specific salary increase budget

Greater focus needed on pay equity, transparency and flexibility

Willis Towers Watson’s recent “Getting Compensation Right” study found that well over half the surveyed employers in India (68%) are using their base pay programmes to differentiate pay and to drive higher individual performance. However, 52% of employers said that their pay strategies were limited by how much they can afford.

Rakyan continued, “Organisations can respond to this challenge by aligning their compensation strategy with immediate employee expectations around pay transparency and pay equity. Today, employers want employees to understand the spirit and basis of their pay programs and on the other hand, employees expect to be competitively paid. Employers also need to think creatively about their rewards strategy and consider flexibility in managing and delivering rewards.”

About the survey

The Salary Budget Planning Survey is a bi-annual survey compiled by Willis Towers Watson Data Services. The survey, timed to coincide with companies’ compensation planning for 2019, looks at a range of industry sectors and job grades, focusing on salary movement and review practices.

The survey was conducted in June 2018 across 21 markets in Asia Pacific, including India

Courtesty https://www.willistowerswatson.com