2021 was an interesting year. We started with a sense of optimism at the beginning of the year hitting the ebb of the first COVID-19 wave, to entering the doorsteps of the third wave in 2022 and a lot has happened in between. While it’s a lot to unpack, I am going to focus on what happened in the world of rewards as organisations laid the foundations for accelerated growth in 2022.
As we were planning for the 15th Annual Rewards Conference, this was one of the pressing questions that we wanted to address.
After a turbulent 2020, the question was how is corporate India going to react and what kind of decisions are organisations going to take amidst the war for talent particularly in the digital space.
After all, there is the precedence of navigating economic crises. After the global financial crisis, India was one of the economies to show resilience and bounce back within a year and then subsequently, the growth story continued for India for the next decade. The current market sentiment almost resonates the after years of the 2008 global financial crisis.
As we are looking at an upswing in consumer sentiment at the beginning of 2022, there are also associated challenges that organisations need to overcome. A growing market also means better opportunities for employees. With sectoral convergence accelerating towards digital ways of working, related skills are truly becoming prized commodities to possess.
We are witnessing higher wage bills and pay increases, razor focus on key talent, and higher attrition and hiring across most sectors. At the same time, organisations are focusing on long term investment opportunities as well as sharper differentiation in performance.
Another interesting shift we are witnessing is the accelerated change brought about by COVID-19 across sectors that would have otherwise taken much longer. ‘Future of work’ is no longer distant in time and is no longer nebulous as a concept, but it is here and now as this giant experiment of hybrid or remote working was been imposed on most of us. As the economy continues to open, rewards leaders will have to find innovative solutions to navigate complex challenges and manage expectations from a multi-generational, multi-skilled, multi-cultural workforce with equally varied expectations from the workplace and work itself.
Our endeavour has been to unpack how businesses are reacting to the state of growth, how are they dealing with the surge in attrition amidst heightened hiring needs and how are they looking at digital talent today and as a long-term strategy.
Aon's latest Salary Increase Survey saw the participation of close to 1300 organisations across sectors in India and collected robust information on various key trends through a combination of lead and lag indicators of business performance. As per the survey, there was a 36% increase in the number of organizations projecting improvement in business outlook in 2022 as compared to 2021. A jump from 45% to 62% in organizations projecting growth in the upcoming annual cycle clearly indicates that organisations believe the worst is behind us. Businesses across sectors are now preparing for growth and expansion. Debate on talent has taken the centre stage.
Our interactions with several key leaders in the industry during the 15th Annual Rewards Conference reveals some interesting underlying factors. Overall, the resilience has increased because of increased vaccination coverage, but several fundamentals of business operations have undergone a complete transformation. Companies have now learnt to operate despite the pandemic by re-visiting their supply chain operations, GTM strategies, and manpower availability - all essentials for business continuity.
Most firms selling to end consumers (like Airlines or Automotive) suffered from a drop in consumption across the board, but are now either experiencing or forecasting growth in uptake due to pent up demand - as suggested by indicators such as rise in domestic aviation and growth in the sale of passenger vehicles. Even retail businesses in the space of financial services did experience their share of turbulence, but now sectors such as Retail Banking are showing signs of recovery.
The technology sector has probably been the most agile during the early stages of the pandemic and most organisations currently enjoy a surge in business growth as end consumers as well as enterprises rush towards building digital dexterity. Many tech-based firms have seen exponential growth during the last two years - especially the ones that are able to deliver their services remotely (like digital payment services) and the ones allowing end consumers to reduce human contact (like delivery services).
This shift in business sentiment, naturally cascading to growth in investments and hiring, has opened up the job markets like never before. Aon's latest Salary Increase Survey reports overall attrition across sectors at 20% as compared to 12.8% in 2020. IT and E-Commerce - two of the top three sectors in terms of pay rise - are also in the top three in attrition. The demand escalation for digital talent has been a major contributor to this trend. While in the short term this is a staffing problem and can be addressed through a talent bench strategy, in the mid to long term, organisations will need to place bets on skills of the future. Predicting and investing in skills for tomorrow will allow organisations to steer ahead in this race and avoid having to go to the market when the demand is high. Today, companies with robust training infrastructure are benefiting significantly from this strategy.
This issue manifests very differently for rewards practitioners. Many practitioners believe that today the pay benchmarks for Digital talent are impossible to predict with this kind of volatility. The average pay increase for “Digital Talent” in 2021 has been at 12.5% as compared to an overall average of 8.8% for India Inc. Maximum investment is observed in IT, E-Commerce and Financial Services. Therefore, it has become important for organisations to identify the right buy-build ratios for themselves. While strategic criticality of acquiring the right digital capabilities might vary across sectors, one common theme most experts tend to agree on is having a segmented rewards strategy and focusing on skill-based pay.
Companies are today navigating the complexities of competing with firms across a much wider spectrum of industries than ever before. While some organisations showcase the opportunity of massive future wealth creation (such as investor-backed start-ups), others promise professional growth through a global career architecture (such as large MNCs). With a wider range of options, candidates also look for personalised offerings in terms of the rewards package. It is critical, therefore, for each organisation to build its value proposition and hope to strike a chord with the right talent pool.
As organisations plan to mitigate these challenges, they also need to keep an eye on the long-term strategy for talent. It will be interesting to see the evolution of alternate employment models getting popular such as gig or freelance workers and how organisations that are most agile through their systems, processes and culture take advantage of the upcoming opportunities in our growing market.