Average pay hike in India projected at 9.1% in 2022

Average salary hike in India is expected to increase to 9.1% in 2022 from 8.0% in 2021, according to a survey by Deloitte Touche Tohmatsu India.

Almost all organisations are planning to give increments in 2022, compared with 92% in 2021 and only 60% in 2020, the survey findings show.

The projected increment in 2022 is higher than the pre-Covid-19 pay hike in 2019 by 50 basis points, the 2022 Workforce and Increments Trends Survey shows.

In 2022, 34% organisations are planning to give double-digit average increments, compared with only 20% in 2021 and 12% in 2020, as per the survey results. Employees at junior management are, on average, expected to receive a double-digit increment in 2022.

The study finds that 2022 increments are expected to be higher across all major sectors, compared with 2021 and the pre-pandemic levels observed in 2019.

Life sciences and IT sectors are likely to give the highest increments this year. Fintech, IT-product companies, and digital/e-commerce organisations are expected to give double digit increments.

"Corporate India reacted differently to each Covid-19 wave. In 2020, the pandemic pulled the economy in a recession and lower increments, pay-cuts, and hiring freeze were common. In 2021, increments were higher, paycuts were reversed, and Covid-19-specific benefits were introduced. However, in 2022, in line with the pick-up in activity, as well as hiring and attrition, companies have surpassed pre-pandemic levels of increments, with a sharp focus on retention of talent through rewards," says Anandorup Ghose, partner, Deloitte Touche Tohmatsu India.

According to the salary hike survey, 92% organisations are expected to use individual performance to differentiate increments across employees, with top performers expected to get 1.7 times the pay hike given to average performers.

More than half the organisations are expected to differentiate increments by levels of management -with senior management getting a lower increment than relatively junior employees, it says.

45% are planning to differentiate increments of their employees based on their current compensation positioning with respect to the market. The percentage of employees to be promoted is expected to increase from 11.7% in 2021 to 12.4% in 2022, with the average additional increment to those promoted expected to be 7.5% in 2022.

"While the 2022 increment of 9.1% is only for existing employees, the overall employee cost could go up by an even higher amount, owing to factors such as incremental hiring, one-time pay corrections, and retention bonuses," says Anubhav Gupta, partner, Deloitte Touche Tohmatsu. "Increments are currently being driven, predominantly by the local labour market conditions. Where increments go from here on will be a function of economic viability and fundamental business growth over the medium to long term."

Pan India, the average attrition has increased from 15.8% in 2020 to 19.7% in 2021, with voluntary attrition going up by more than 5% between 2020 and 2021, the survey says.

To tackle the "great resignation", some organisations are also undertaking retention strategies, such as market corrections, higher increments, and one-time bonuses.

Over 90% organisations are planning to pay bonuses in 2022. Four out of every 10 organisations are planning to pay more than 100% of the target bonuses. Apart from financial incentives and rewards, organisations are also looking to enhance employee retention through job enrichment, career management, and employee upskilling.