'India Inc to hand out bigger hikes next year'

India Inc employees are likely to get bigger pay hikes in 2023, with companies budgeting for an overall median increase of 10%, a report from global advisory firm WTW has said.

This translates to an average salary increase of 9.8% in 2023, compared to the actual 9.5% increase paid out in 2022. Financial services is expected to see the highest salary increase at 10.4%, followed by banking at 10.2% and technology, media and gaming at 10%, as per WTW's Salary Budget Planning Report. Concerns around inflation and tighter labour markets have influenced the higher projected salary budget, it said.

As per the report, 58% of Indian employers have budgeted for higher salary increases this year compared to last year, while 24.4% are making no changes in the budget. Only 5.4% have reduced the budget as compared to 2022.

Interestingly, companies are planning for higher salary hikes even though their business outlook has tempered since last year. The survey reveals that 41.6% of companies in India have projected a positive business revenue outlook for the next 12 months, down from 51.5% in Q4 2021, while 7.2% companies have projected a negative outlook against 6.7% previously. Driving this phenomenon is the fact that attracting and retaining talent is the biggest challenge for Indian companies in 2022. The recent WTW Reimagining Work and Rewards survey revealed that 78% employers were struggling on this front. Voluntary attrition rates in India continue to be amongst the highest in the Asia Pacific region at 15.1%, second only to Hong Kong.

Rajul Mathur, consulting leader India, work and rewards, at WTW, told ET that organisations are aware that the business environment is changing but they are willing to take a bet to solve the problem around talent.

"Despite the economic headwinds, higher projections for 2023 reflect cautious business optimism and a continued tight labour market. The need to manage talent is so great that companies are giving bigger hikes; they don't want to take chances because they have lost a lot of people. This will happen till there is a tangible impact on business parameters," Mathur said. Overall, the most cited reasons for organisations reporting higher 2022 actual salary budgets versus projections made last year were concerns over a tighter labour market (68.3%), employee expectations/concerns (44.7%), and anticipation of stronger financial results - actual or forecasted (26.4%).

At 10%, salary increases in India will continue to be the highest in the APAC region next year. China is projected to see an increase of 6%, followed by Hong Kong and Singapore at 4%. Information technology (65.5%), engineering (52.9%), sales (35.4%), technically skilled trades (32.5%), and finance (17.5%) will be the most sought-after functions for recruitment in the next 12 months.

This report summarises the findings of WTW's biannual survey on salary movement conducted in April and May 2022. The survey has 590 participants from India.