India to see 10% salary increase in 2023
Concerns over tighter labour markets and inflation continue to influence the higher projected salary budget.
Companies in India are budgeting an overall median increase of 10% for 2023, (translating to an average salary increase of 9.8%) compared with the actual 9.5% increase in 2022, finds global advisory, broking and solutions company WTW’s Salary Budget Planning Report.
According to the report, more than half (58%) of the employers in India have budgeted for higher salary increase this year compared to last year, while a quarter of them (24.4%) making no change in the budget. Only 5.4% have reduced the budget as compared to 2022.
At 10%, salary increases in India continue to be the highest in the APAC region. China is projected to see an increase of 6%, with Hong Kong at 4.0% and Singapore at 4% next year.
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%)
Economic outlook, hiring and attrition rates
Approximately 42% of companies in India have also projected a positive business revenue outlook for the next 12 months, while only 7.2% have projected a negative outlook.
In addition, the survey finds that information technology (65.5%), engineering (52.9%), sales (35.4%), technically skilled trades (32.5%) and finance (17.5%) will be most sought-after functions for recruitment in the next 12 months.
Voluntary attrition rates in India continue to be amongst the highest in the region at 15.1%, only second to Hong Kong.
“2022 saw actual salary increments being higher than budgets and this was largely due to better-than-expected business performance and the need to retain talent. Despite the economic headwinds, higher projections for 2023 reflect cautious business optimism and a continued tight labour market," said Rajul Mathur, consulting leader India, Work and Rewards, WTW.
Sectoral trends in India
The financial services, banking, and technology, media and gaming sectors are expected to see the highest salary increase at 10.4%, 10.2% and 10% respectively.
“We saw significant salary increases across sectors in 2022 and a similar trajectory is expected in 2023. With increased focus on technology enabled growth, the demand for digital skills is driving pay increase for tech talent, especially in the technology, media and gaming,banking and financial services sectors”, added Mathur.
Increased variable payouts in 2022
Better than expected business performance has also resulted in higher variable pay-outs in 2022 across career bands. Companies are allocating more variable pay budgets to above average and top performers.
“With such a dynamic business environment, coupled with a hot talent market, it is critical for organisations in India to develop a compensation strategy aligned with macro-economic realities, sector dynamics, business objectives and employee expectations. We’re seeing organisations focus on long-term incentives, innovative career growth opportunities, flexible working and overall wellbeing to grapple with the current talent supply challenges," said Mathur.
The survey, conducted in April and May 2022, received approximately 22,570 sets of responses from companies across 168 countries worldwide. The survey has 590 participants from India. In Asia Pacific, 6,945 organisations from 14 markets responded.