Detailed studies by Aon, a consultant, show the possible thinking within companies’ leadership while finalising their salary increase strategies.
Salary decision strategies
Macroeconomic factors are going to influence some of the salary planning decisions in companies. Those looking to limit the increase in salary pools will point at emerging issues and narratives such as possible recession or the rise in interest rates. In some cases, layoffs have been initiated and the outlay needs to be planned for those.
On the other hand, those looking to increase salary pools will be keen to retain good employees and manage the competition for scarce talent in a gainful way, while providing a way to manage the rise in inflation.
But the situation is not uniform across sectors and across companies. Aon’s research highlights company-specific factors that will tilt the balance. Right from the performance of the firm, achieved targets and market competitiveness to more internal factors such as salary inequities, target promotion rate, level of turnover, mix of cash versus other forms of compensation, and firm demographics in terms of new hires versus more tenured employees, among others, will play a role in driving the salary planning decisions.
Hikes across sectors
Multiple reports from Aon to Korn Ferry paint an overall average/median salary increase of around 10% in India this year, which is relatively higher than what is being planned in countries such as the US and Germany.
The Korn Ferry survey has predicted an overall hike of 9.8%, with a possibility of higher increments in sectors such as life sciences, healthcare and high-tech.
A WTW survey highlighted sectors such as financial services, tech media and gaming, pharma, biotech, chemicals and retail as those that will see higher salary increases in percentage terms.
The Aon survey said the top-paying sectors this year would be ecommerce, tech platforms and products, global capability centers, tech consulting, services and financial services. FMCG is another area it was bullish about.
Deeper considerations after the pandemic
The two years of the pandemic and the remote and hybrid working models it introduced have added to the complication when looking at factors like inflation in salary adjustments.
There are other considerations as well — gender pay parity, possible impact on jobs and salaries from attrition, emerging trends such as quiet quitting, moonlighting and also the increase in freelance or gig work.
While the immediate salary increase for the year is going to be the topmost question on salaried people’s minds, what is equally if not more important is to continue goal-based and future-facing financial planning. After all, no matter what the hike percentage will be, we still need to keep planning for our short-term and long-term financial needs. And we do not need to wait till March to keep our focus and discipline on that.