India Inc to sustain 10% average salary hike in 2019: report

Employees in India can look forward to an average salary increment of 10% in 2019, same as the actual salary increases in the past three consecutive years, owing to steady economic growth, progressive reforms and cautious optimism across sectors, says a new report.

According to the report released by global advisory, broking and solutions company, Willis Towers Watson, India will see the highest salary hikes in the Asia-Pacific region, followed by Indonesia at 8.3%, China at 6.9%, Philippines at 6%, and both Hong Kong and Singapore at 4%.

Pharmaceutical employees will be the top gainers with a projected salary hike of 10.3%, followed by consumer products and retail companies (10%) due to a revival in consumer sentiment, said the Q3 2018 Salary Budget Planning Report.

The financial services sector, comprising of banks, non-banking financial institutions (NBFCs) and insurance companies is likely to see a steady rise in increments from 9.3% in 2018 to 9.6% in 2019, the report said.

Interestingly, this projection comes at a time when the NBFCs have suffered a jolt from the on-going crisis at India's leading infrastructure finance company Infrastructure Leasing & Financial Services (IL&FS) due to default in payments and while several leading Indian banks have come under the regulator’s scanner due to corporate governance issues.

“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,” said Sambhav Rakyan, data services practice leader, Asia-Pacific, Willis Towers Watson. “Indian companies will likely see a lower salary increase which is more directly linked to their financial performance," he adds.

The fluctuating currency and rising crude oil prices have been two major concerns for Indian companies across sectors this year. While the Rupee hit an all-time low of 73.42 in morning trade of October 3, against the U.S. dollar, crude oil prices breached the $85 mark.

“Multi-national companies that typically have KPO/BPO (knowledge process outsourcing/ business process outsourcing) 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,” added Rakyan.

For each dollar of the total salary increment budget that a company allocates to an average or below-average performer, $1.31 will be allocated to a top performer, the report said.

“Companies in India 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,” said Arvind Usretay, director - rewards, Willis Towers Watson India.

The bi-annual report, which surveyed 21 markets in Asia Pacific, including India, also projects a sharp drop in variable pay allocation across the board as only 37% of its respondents have projected a positive business revenue outlook for the next 12 months, as compared to 48% last year.