Year 2009: Vulgar salaries 'out', austerity 'in'

NEW DELHI: Vulgar' salaries became a sore thumb in 2009 and everyone from CEOs to office assistants felt the pinch of the economic downturn, but Indians still managed a worldwide-best average six per cent hike in their pay.

With economy showing strong signs of recovery, the hikes could be fatter in the new year with industry analysts forecasting anything above 10 per cent.

A host of HR experts believe tough economic conditions globally gave a wake-up call to companies during 2009 to curb their extravagant ways in compensation structures and turned them into more thrifty and performance-conscious firms.

For most of the year, Europe and the US were busy pruning salaries of executives of fallen firms and many companies embraced austerity, while Indians became conscious of high salaries paid to industry captains and perks to those who run the government.

The government asked ministers and departments to cut down on wasteful expenditure, while Corporate Affairs Minister Salman Khurshid asked CEOs to abstain from "vulgar" salaries - at a time when many had no salary to take home.

"One of the more difficult periods (2009) in the last 10 years, no doubt. (It) Should be seen in the context of the high (of the previous years) and pain of a severe fall," KPMG Partner & Country Head - BPS - People and Change (Human Capital) Practice Ganesh Shermon said.

Experts at various HR consultancies feel New Year 2010, would be considerably better in terms of salary hikes and hiring although firms will continue to tread cautiously.

"For 2010 we forecast average salary hikes of 10.9 per cent across all sectors. However, the appraisals would vary across the sectors," Mercer India business leader for information product solutions Gangapriya Chakraverti said.

Echoing a similar view, HR consultancy Hewitt Associates said in 2010 salary hikes are expected to climb quickly and be definitely in double digits.

"The salaries are likely to rise as companies would face problems of getting the right talent, inflation, building up a pipeline of leaders for the future," Hewitt Associates (India and Middle East) Executive Compensation & Governance Anandorup Ghose said.

Consulting firm Deloitte India's Senior Director, Human Capital Advisory Services, P Thiruvengadam said "2009 was not seen as a major surprise by employees and HR professionals as the global exposure and the media coverage of the downturn from middle of 2008 was extensive enough to prepare people for a balanced expectations...it was a paradigm shift the way people accepted the lower levels or no increase."

Besides, owner of leading job portal Naukri.com, Info Edge's COO Hitech Oberoi said, "2009 started on a bad note and hiring had slowed down but things have improved considerably by the end of the year. 2010 is expected to be much better in terms of hirings and salary hikes with firms taking up replacement hirings."

Oberoi added that salary hikes are expected to be in the range of 10-15 per cent in 2010.

In terms of sectors, IT, Business Process Outsourcing and export-related space were impacted most with layoffs, sharp salary cuts and increment freeze coming their way in 2009.

"In 2010, parts of Banking, Financial Services & Insurance (BFSI) sector, consulting and telecom may fair the best for salary hikes," KPMG's Shermon said.

Mercer's Chakraverti said, "Sectors which are likely to fair better in terms of salary hikes in 2010 are auto and pharma sectors, while IT and BPO which were the worst hit in 2009 are likely to remain under weather in 2010."

"Sectors like infrastructure, pharma did not have a major setback. I anticipate all sectors to return to decent levels of growth, including FMCG. Retail is one sector one would like to wait and watch," Deloitte's Thiruvengadam said.

Moreover, middle level executives may walk away with the bulk of salary increments in the new year while senior level executives may continue their austerity drive until the economy is clearly out of the woods.

"The freshers and mid-level executives will clearly see salary hikes in the next year. Though those at the senior rung may not get increments but will lead the chart in terms of base salaries," Hewitt Associates' Ghose said.

Deloitte said that the overall confidence level or optimism during last year was one of extreme caution about growth and turnover.

"The signs are that, 2010 would be a better year in terms of salary growth. There are skill set gaps which would require paying the right amounts to get the talent on board," Thiruvengadam said.