Average salary hike in India likely to be 9.1% in 2022

Indian companies are expected to dole out an average increment of 9.1 per cent in 2022, higher than the pre-COVID-19 increment in 2019, as companies are focusing on retention of talent through rewards.

According to the 2022 Workforce and Increments Trends Survey by Deloitte Touche Tohmatsu India LLP, the average India 2022 increment is expected to go up to 9.1 per cent from eight per cent in 2021.

Moreover, the 2022 projected increment is higher than the pre-COVID-19 increment in 2019 by 50 basis points (bps).

A basis point is equal to 1/100th of a percentage point.

"Corporate India reacted differently to each COVID-19 wave.

"In 2020, the pandemic pulled the economy in a recession and lower increments, pay-cuts, and hiring freeze were common. In 2021, increments were higher, pay-cuts were reversed, and COVID-19-specific benefits were introduced.

"However, in 2022, in line with the pick-up in activity as well as hiring and attrition, companies have surpassed pre-pandemic levels of increments, with a sharp focus on retention of talent through rewards," said Anandorup Ghose, partner at DTTILLP.

Almost 450 organisations participated in the 2022 Workforce and Increment Trends survey.

Moreover, in 2022, 34 per cent of the organisations surveyed are planning to give double-digit average increments, compared with only 20 per cent in 2021 and 12 per cent in 2020.

The study finds that in 2022, increments are expected to be higher across all major sectors, compared with 2021 and the pre-pandemic levels observed in 2019.

Life sciences and IT sectors are likely to give the highest increments in 2022.

Finance technology, IT product companies and digital/e-commerce organisations are expected to give double-digit increments in 2022.

Ninety-two per cent of the organisations are expected to use individual performance to differentiate increments across employees, with top performers expected to get 1.7 times the increment given to average performers.

More than half the organisations are expected to differentiate increments by levels of management (with senior management getting a lower increment than relatively junior employees).

The percentage of employees to be promoted is expected to increase from 11.7 per cent in 2021 to 12.4 per cent in 2022, with the average additional increment to those promoted expected to be 7.5 per cent in 2022.

"While the 2022 increment of 9.1 per cent is only for existing employees, the overall employee cost could go up by an even higher amount, owing to factors such as incremental hiring, one-time pay corrections and retention bonuses," Anubhav Gupta, partner at DTTILLP, said.

Gupta further noted that "increments are currently being driven, predominantly by the local labour market conditions.

"Where increments go from here on will be a function of economic viability and fundamental business growth over the medium to long term."

Across India, the average attrition has increased from 15.8 per cent in 2020 to 19.7 per cent in 2021, with voluntary attrition going up by more than five per cent between 2020 and 2021.

To tackle the "great resignation", some organisations are also undertaking retention strategies, such as market corrections, higher increments, and one-time bonuses.

More than 90 per cent of the respondent organisations are planning to pay bonuses in 2022.

Four out of every 10 organisations are planning to pay more than 100 per cent of the target bonuses.

Apart from financial incentives and rewards, organisations are also looking to enhance employee retention through job enrichment, career management, and employee upskilling.

The survey also found that only seven per cent organisations currently consider environmental, social and governance (ESG) factors while formulating their rewards and incentives programmes.

Gender diversity ratio, too, at an all-India level remains skewed (only one in four employees is a woman).