2022 salary hikes to hit 6-yr high amidst the 'Great Resignation'

The Indian corporate sector will see highest salary increase in six years at 9.9% during 2022 as business outlook turns widely positive, says a survey. The rise in salary hikes follows the ‘Great Resignation’ of 2021, which left companies with highest attrition rate in two decades.

According to the 26th Annual Salary Increase Survey by Aon India, one-third (33%) of the surveyed organisations are expected to give out salary increases over 10% in 2022, an increase of almost 5 percentage points from 2021. Salary hikes have been hovering around 9% since 2017, even dropping to 6.1% in 2020 amid the first wave of the pandemic. It later returned to pre-pandemic level of 9.3% in 2021.

“Salary increases should come as a welcome break for employees amidst a volatile period. For employers, it could emerge as a double-edged sword when you combine the rising cost of talent with record-high attrition numbers. This trend is fuelled by economic recovery and the need for organisations to invest in new age capabilities to build a resilient workforce,” comments Nitin Sethi, partner and CEO of Aon’s Human Capital Solutions in India.

Overall attrition rate among Indian companies increased to 21% in 2021, after moderating to 12.8% in 2020 from 16.1% in 2019. Voluntary attrition was at 15.4%, the Aon survey noted.

Despite a tough few months with the second and third waves of Covid-19 infections, India continues to project the highest salary increases among the BRIC (Brazil, Russia, India and China) nations in 2022, with Brazil at 5%, Russia at 6.1% and China at 6%.

Employees in the United States are projected to see their paychecks rise 3.6%, whereas those in the United Kingdom and Germany can expect salary hikes to the tune of 3% each. Corporate sectors in Japan and Singapore can increase salaries by 2.9% and 4%, respectively.

The increase in salary comes on the back of substantial rise in optimism towards business outlook, with 88.3% respondents expecting to see improvement, as compared to 77.5% in 2021 and only 36.8% in 2020. Only 9.7% companies expect no impact on business during this year, while even 2% expect to see some decline.

E-commerce and venture capital (12.4%), high tech/IT (11.6%), professional services (10.9%), IT-enabled services (ITeS) (10.7%), entertainment/gaming (10.2%), and life sciences (9.6%) are some of the sectors with the highest projected salary increases. Meanwhile, metals/mining (8.3%), QSR/restaurants (8.5%), and cement (8.6%) are expected to see the lowest salary hikes this year.

“We believe that the fundamentals of the Indian economy remain strong and that there is a positive business sentiment. Even sectors that struggled during the first wave of the pandemic, such as retail, logistics and quick-service restaurants, have bounced back by focusing on modern trade/digital channels, which is reflected in salary increases of 8 percent and above. However, we do see some potential headwinds due to anticipated high inflationary pressures and the still-prevalent COVID-19 threat,” says Roopank Chaudhary, partner in Aon’s Human Capital Solutions in India.

The Aon salary survey included responses from 1,500 organisations across 40 sectors.