Average salaries in India are estimated to increase by 10.2 per cent in 2023, lower in comparison to 10.4 per cent (Actuals) in FY’22, but still in double digits, according to a report by professional services organisation Ernst & Young (EY).

Projected salary increases for 2023 are slightly lower than the actual increases for 2022 across all job levels, except for blue-collar workers who are projected to have a slightly larger decrease in compensation in 2023.

Sectors that were severely impacted by the pandemic are experiencing a resurgence.

E-commerce has the highest projected salary growth at 12.5 per cent, followed by professional services at 11.9 per cent, and information technology  (IT) at 10.8 per cent, says the EY ‘Future of Pay’ 2023 report, which highlights talent, attrition, and compensation trends across sectors in India Inc.

The e-commerce industry in India has experienced rapid growth in recent years, driven by factors such as increasing internet penetration, rising consumer spending, and the COVID-19 pandemic. However, there seems to be a 170 bps correction in 2023 projections as funding remains cautious.

Driven by increasing demand for skilled professionals, the IT sector has consistently offered one of the highest salary increases in India. However,  the report notes that a minor downward trend is seen as global market demand is experiencing a slowdown.

Further, key skills and roles continue to be in demand across sectors and command premium in the market.

“The current talent market in India is dynamic and evolving rapidly, shaped by a combination of global economic trends, technological advancements, and changing workforce expectations. As the Indian economy continues to grow, competition for top talent is intensifying across various industries. Top talent with critical skills and high-performance history command compensation premiums ranging from 1.7 to 2X of average talent,” said Abhishek Sen, Partner & Total Rewards Practice Leader, Workforce Advisory Services, EY India.

Sectors looking to hire in 2023

Some of the most promising emerging sectors for jobs in India in 2023 include renewable energy, e-commerce, digital services, healthcare, telecommunications, educational services, retail and logistics, and financial technology.

These sectors are anticipated to keep growing and provide a wide range of employment options for qualified employees.

Top skills in demand

Technology skills such as those in artificial intelligence (AI), machine learning (ML) and cloud computing are in high demand and command a premium of 15 per cent to 20 per cent over basic software engineering compensation levels.

Analytical skills like risk modelling, data architecture, and business analytics command a premium of 20 per cent to 25 per cent.

Forty-eight per cent organisations offer a premium for the skills which are high in demand. The average premium is up to 1.9 times for skills that are high in demand as compared to basic skills. Moreover, pay hikes offered to average vs high-performing talent operate at a ratio of 1:1.8 as an average across sectors.

Variable pay trends

Average variable pay-out as a percentage of total compensation was 15.6 per cent in 2022 in comparison to 14 per cent in 2021. Financial institutions had the highest overall variable pay-out percentage of 25.5 per cent, indicating a higher emphasis on performance-based incentives. Whereas the telecommunications industry had an overall variable pay-out percentage of 13.7 per cent, relatively lower compared to other sectors.

Future outlook for rewards

Companies are moving away from giving disproportionate salary hikes and are instead focusing on promoting healthy ways of working. Nearly 75 per cent organisations have wellness programmes.

The report noted that as companies seek to attract and retain top talent, they would incline towards rewards such as equity-based long-term incentives, customised benefits packages such as student loan repayment assistance, pet insurance, elder care support, employee assistance programs, flexible work, and so on.