Average increment given by companies at 8% in 2021, expected to touch 8.6% in 2022: Survey

The average rate of increment provided by organisations in India to employees stood at 8 per cent in 2021, while early estimates for 2022 project increments at 8.6 per cent, according to the Workforce and Increments Trends Survey by Deloitte.

The second phase of the survey provides India-specific insights on rewards, the impact of Covid-19 on benefits policies, and the return to work strategies of organisations. Phase-1 of the survey was released in February 2021.

According to the survey findings, 92 per cent of companies gave an average salary increment of 8 per cent in 2021, compared with only 4.4 per cent in 2020, where just 60 per cent companies had extended a pay hike.

According to early estimates, the average increment for 2022 is expected at 8.6 per cent in line with a "healing economy and improving confidence."

"If this holds true, increments in 2022 would reach the pre-pandemic levels of 2019," the report said.

Around 25 per cent of companies surveyed have projected a double-digit increment for 2022.

Anandorup Ghose, partner, Deloitte Touche Tohmatsu India LLP, said, “While most companies are projecting a higher increment in 2022 compared to 2021, we continue to operate in an environment where Covid-19 related uncertainty persists, making it harder for companies to forecast"

"Some of the survey respondents have also just closed their 2021 increment cycle, so 2022 increments are a fair distance away for them. GDP forecasts for FY 2021-22 were revised down after the second wave and we expect organisations to closely watch similar developments while managing their fixed cost increases next year," added Ghose.

In 2021, approximately 12 per cent of employees were promoted as compared to 10 per cent in 2020. Almost 12 per cent companies have updated their bonus or variable pay plans to align their rewards structures with changing priorities. With respect to hiring, 78 per cent companies stated that they have started recruiting at the same pace as they used to prior to Covid-19.

IT likely to offer highest increments

According to the survey, the Information Technology (IT) sector is likely to offer the highest increments in 2022, followed by the Life Sciences sector.

IT is the only sector that is expected to extend double-digit increments, with some digital / E-commerce companies planning to give some of the highest increments, the report said.

Sectors such as retail, hospitality, restaurants, infrastructure, and real estate continue to project some of the lowest increments in line with their business dynamics.

Furthermore, increments are not expected to be the same for all employees as organisations continue to differentiate pay increases by skills and performance. The top performers can expect about 1.8 times the increments given to average performers.

Anubhav Gupta, partner, Deloitte Touche Tohmatsu India LLP, said, “Organisations are trying to balance employee cost with what is best for their employees in what has been a difficult couple of years for many. It is heartening to see most companies extending increments in 2021, even in sectors which have not fully recovered yet."

"Going forward, function specific increment differentiation may become more prevalent as attrition rates vary significantly across different skills. Compensation is usually one of the top reasons for attrition, particularly at the junior management level, where virtual hiring has made it easier to jump ship," added Gupta.

Organisational policies

About 60 per cent of organisations have updated their health insurance policy owing to the pandemic, while 24 per cent of organisations have readjusted their life insurance policy.

"Most organisations that updated their insurance policies, either introduced a Covid-specific claim or increased the coverage amount for their employees," the report said.

Almost two out of every three organisations readjusted their leave policy and introduced special leave of 14 to 21 days, over and above the regular annual paid leave.

Nearly half the survey respondents provided some kind of monetary compensation to the family of employees who lost their lives due to Covid-19.

Return to office

In terms of policies around return to office, 25 per cent of companies have conducted an employee preference survey to decide their return to work strategy.

The IT sector has been the most proactive in assessing employee preferences with regards to the desired workplace, the report said.

In most cases where such a survey was conducted, employees seem to prefer a hybrid work arrangement with the flexibility of working from home and office, wherever feasible.

However, at an all-India level, around 40 per cent of organisations have finalised their return to work strategy.

Furthermore, almost 90 per cent of organisations said they are likely to finalise a hybrid model in future.

"Approval from line managers or setting limits on the number of days working from home were the more common alternatives preferred by companies," it said.

Only one per cent of the organisations are likely to use an only work from home model; 88 per cent of companies are not planning to allow their employees to work from any location on a permanent basis.

"As organisations proceed towards embracing the new normal, some leading organisations are also taking specific initiatives to prepare managers to lead teams in a virtual/ hybrid workplace model and drive collaboration through training programmes," it further said

“Previously, organisations used to decide who could work from home; they are now deciding who could / should work from office. While the hybrid model seems to be the preferred choice, there are critical questions around employees’ health and safety, flexibility and choice, governance, data security, business continuity, collaboration, team work, and culture that need to be carefully thought through before finalising a robust return to work strategy,” Ghose added.

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