The Hindu Business Line : ‘Slowdown to have minimal impact on pay hikes in 2009’

Bangalore, Aug. 20 In a study of 150 companies, it was found that although 63 per cent of the companies have discussed the impact of the economic slowdown and the rising input costs on salary budgets for 2009, there would be minimal impact on compensation hikes next year.

The study conducted by Hewitt Associates across nine sectors in the country concluded that next year’s salary hike would only be lower by about one percentage point (at 13.9 per cent) compared to 2008, which saw an average salary increase of about 14.8 per cent.

The study also said that companies are looking to balance the pressures of inflation and lower HR budgets by increasing productivity (57 per cent) and redeployment of manpower (31 per cent). About 30 per cent of the companies surveyed stated that they have increased performance linkages to counter fixed pay increases. Only 20 per cent of the organisations surveyed mentioned a hiring freeze or slowdown.

“This is a good time for organisations to consolidate their HR strategies towards a high performance orientation and also look at removing redundancies from their organisation structures,” said Mr Sandeep Chaudhary, leader of Hewitt’s Rewards Consulting Practice in India.

While 25 per cent of the companies surveyed admitted that they were looking to reduce staff budgets, the cuts would largely be in the areas of travel and recreation. Nine per cent of the companies also mentioned a reduction in training budgets. One per cent of the companies are looking at increasing working hours to manage rising costs of business, while four per cent are considered a promotion freeze — all from the IT, ITES and BFSI sectors.

Sector-wise expected increase: Infrastructure, which has been offering the highest hikes (24.1 per cent in 2008) expects to retain the top position, with companies predicting salary hikes of 18.8 per cent in 2009. Manufacturing, pharma, BFSI, IT and ITeS are projecting a dip of about one percentage point in their salary hikes compared to 2008.

The study also found that the average salary increases across levels continue to be led by middle and junior management, the 2009 projections are a little lower across all levels.

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