India Inc may give up to 12% salary hike

India Inc may give salary hikes in the range of 9-12 per cent in the coming financial year to retain talent amid revival in the job market, according to consultancy Ernst and Young said.

Most companies are expecting higher attrition levels over the next few months on jobs coming back into the economy resulting in salary hikes being used as a tool to retain talent. "At an overall level, extraordinary jump in increments do not seem probable and the average salary increase is likely to be in the range of 9-12 per cent," Ernst & Young partner and national head (People & Organisation) N S Rajan said.

However, Rajan cautioned that along with the pay hikes, companies are likely to follow a cautious approach of keeping tight monitoring and controlling of any additional salary costs. In spite of excitement around economic recovery, average pay hikes across sectors would be slightly conservative.

"While on one hand pharma and FMCG companies will lead the space with increments in the range of 10-13 per cent, the IT and technology companies will give reasonable increments close to eight per cent," Rajan added.

Moreover, the telecom sector is expected to give above average salary hikes in the range of 12-15 per cent. Banking, Financial Services and Insurance sector
is likely to have maximum disparity in terms of future increment levels compared with current ones, with projected salary hikes of 10-12 per cent against nil during the downturn, Ernst and Young believes.

Meanwhile, it said it would be a while before the economy returns to the boom phase of 2007, despite the sentiment being optimistic across sectors. Rajan further stated that a lot of innovation in designing compensation packages may be seen, as there would be a stronger linkage to pay for performance.

"Individual performance, coupled with company performance will be the most commonly used criterion for determining performance bonus. Across levels, variable pay component of compensation packages is likely to go up," he said.

At the senior management level compensation packages may be linked to the company's performance and there would be a renewed focus towards balancing out executive compensation through a focus on retention and reward. Recently, global HR consultancy Hewitt had forecast the Indian companies may provide an average of 10.6 per cent salary hikes - the highest in the Asia-Pacific region in 2010.