The average executive compensation in India has been on the rise with the salary increase for senior executives projected to be the highest in five years at 8.9 per cent in 2022, according to a survey by global professional services firm Aon plc.

Aon on Wednesday released insights from its 2022 Executive Rewards Survey in India. The study analysed data across 475 companies from more than 20 industries in the country.

As per the survey, the salaries of senior executives in India have increased 8.9 per cent in 2022, up from 7.9 per cent in 2021. The survey further found that the Pay at Risk - which is the sum of Variable Pay and Long-Term Incentives (LTI) to Total Compensation - for CEOs stood near 60 per cent, while that for c-level executives, including the chief operating officer, chief financial officer, sales head and chief human resources officer followed closely behind at 50 per cent.

Nitin Sethi, partner and CEO, India for Human Capital Solutions at Aon, said, “Over the last few decades, a large percentage of India Inc has turned to outside talent instead of building from within.”

“However, due to Covid-19 pandemic, talent is in short supply and the cost of attracting, retaining and engaging leadership talent that grows business is rising rapidly. Not only is the average executive compensation increased highest in five years, but variable pay and equity grants have also risen as companies cannot risk losing key talent at senior levels as this has implications on delivering business performance,” said Sethi.

The annual Long-Term Incentive for CEOs on average stood at 125 per cent of fixed pay. 

“Most companies use a mix of performance and retention-based grants,” as per the report. At least 50 per cent of the grant amount was linked to performance measures such as shareholder return, profit, revenue and cashflows.

Pritish Gandhi, director and practice leader, India for the Executive Compensation and Governance Practice at Aon, said, “For determining LTI Quantum, Pay Mix, which is the LTI quantum as a percentage of fixed pay, continues to be the preferred method for India Inc. Progressive organisations are additionally looking at factors such as Total Target.”

“Ownership, which is LTI quantum as a percentage of equity, and Wealth Creation Potential, which is LTI Quantum percentage to target desired wealth creation at exercise, when determining LTI grants to compete effectively with new-age start-ups. Companies must use a mix of performance and retention-based grants to retain their top executives,” Gandhi added

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