Companies in India are expected to give a salary hike of 10 per cent in 2023 as they struggle with rising attrition in the tight labour market, according to a report.
Global advisory, broking and solutions company Willis Towers Watson's Salary Budget Planning report found that companies in India are budgeting an overall increase of 10 per cent for 2022-23, compared with the actual 9.5 per cent growth in the previous year.
According to the report, more than half (58 per cent) of the employers in India have budgeted for higher salary increases for the ongoing fiscal year compared to last year, while a quarter of them (24.4 per cent) made no change in the budget.
Only 5.4 per cent have reduced the budget as compared to 2021-22, it added. The report revealed that at 10 per cent, salary increases in India continue to be the highest in the Asia Pacific (APAC) region.
China is projected to see an increase of 6 per cent, Hong Kong at 4 per cent and Singapore at 4 per cent for next year, it added.
The report was based on a survey across 168 countries in April and May 2022, which includes 590 organisations in India.
It further said around 42 per cent of companies in India have also projected a positive business revenue outlook for the next 12 months, while only 7.2 per cent have projected a negative outlook.
In addition, Information Technology (65.5 per cent), engineering (52.9 per cent), sales (35.4 per cent), technically skilled trades (32.5 per cent) and finance (17.5 per cent) are expected to be the most sought-after functions for recruitment in the next 12 months.
Voluntary attrition rates in India continue to be amongst the highest in the region at 15.1 per cent, only second to Hong Kong, it observed.
“Last year saw actual salary increments being higher than budgets and this was largely due to better-than-expected business performance and the need to retain talent. Despite the economic headwinds, higher projections for 2023 reflect cautious business optimism and a continued tight labour market,” WTW Consulting Leader India, Work and Rewards, Rajul Mathur said.
The financial services, banking and technology, media and gaming sectors are expected to see the highest salary increase at 10.4 per cent, 10.2 per cent and 10 per cent, respectively, he stated.
“We saw significant salary increases across sectors in 2022 and a similar trajectory is expected in 2023. With increased focus on technology enabled growth, the demand for digital skills is driving pay increases for tech talent, especially in the technology, media and gaming, banking and financial services sectors,” Mathur added.
According to the report, better-than-expected business performance also resulted in higher variable pay-outs in 2021-22 across career bands.
Companies are allocating more variable pay budgets to above average and top performers, it added.
“With such a dynamic business environment, coupled with a hot talent market, it is critical for organisations in India to develop a compensation strategy aligned with macro-economic realities, sector dynamics, business objectives and employee expectations.
We're seeing organisations focus on long-term incentives, innovative career growth opportunities, flexible working and overall wellbeing to grapple with the current talent supply challenges,” Mathur added.