News: Average 2021 increment for India estimated at 7.3 percent: Deloitte

Compensation & Benefits

Average 2021 increment for India estimated at 7.3 percent: Deloitte

Top performers are expected to receive 1.7 times the increment given to employees who “meet expectations”. Companies are expected to place fewer employees in the “below expectations” category this year.
Average 2021 increment for India estimated at 7.3 percent: Deloitte

Deloitte Touche Tohmatsu India LLP (DTTILLP) has released Phase-1 of the 2021 Workforce and Increment Trends Survey. The findings provide India-specific insights on increments, performance management, workforce composition, and other HR strategies. Launched in December 2020 as a B2B India-specific survey, the 2021 Workforce and Increment Trends Survey received responses from close to 400 organizations spread across seven sectors and 25 sub-sectors.

According to the survey findings, while only 60 percent companies gave an increment in 2020, 92 percent companies plan to give an increment in 2021. The survey also finds that of 60 percent companies that gave an increment in 2020, a third of them did that through off-cycle increments. Of the companies that did not give an increment in 2020, only about 30 percent plan to compensate employees for the previous year through higher increments and/or bonuses.

Beyond the number of companies, the estimated increment has also experienced an increase in comparison to last year, from 4.4 percent in 2020 to 7.3 percent in 2021, however it remains “considerably lower” than 8.6 percent in 2019. Interestingly, the survey found that 20 percent companies plan to give a double-digit increment in 2021 compared with only 12 percent in 2020.

The increase in increment budgets is in line with the faster-than-expected economic recovery, revival in business and consumer confidence, and early signs of improving corporate profitability, said the survey.

Commenting on the survey findings, Anandorup Ghose, Partner at DTTILLP, said, “COVID-19 has made year-on-year analysis tricky as 2020 has been an anomaly, making 2019 a better year for comparison. Average India 2021 increment of 7.3 percent is still considerably lower than 8.6 percent in 2019. While business activity is rebounding quickly, organizations are managing compensation budgets responsibly considering their affordability and sustainability of fixed cost increases.”

Speaking of industry break down, as per survey findings, every sector is expected to give a higher increment in 2021 compared with the year gone by. However, while the Information Technology (IT) and life sciences sectors are expected to give the highest increments, manufacturing and services sectors continue to offer relatively lower salary increases. 

In fact, life sciences appears to be the only sector that will be able to match its 2019 increment levels. For others, average increment in 2021 is expected to be lower than 2019, with hospitality, real estate, infrastructure, and renewable energy companies estimated to offer the lowest increments. Only digital and e-commerce companies are expected to offer double-digit average increments in 2021. 

“HR and leadership teams in India Inc. have shown tremendous maturity in decision-making to responsibly deal with the impact of COVID-19. Post March 2020, most companies decided either not to offer increments or defer them until they get more clarity. About 25 percent companies even extended a pay cut to senior management. Organizations largely preferred saving jobs of most to offering higher increments and bonuses to a few. Given that the risks related to the pandemic are not over yet, it is no surprise that they are treading with caution,” added Ghose.

How will performance impact increment in 2021?

Beyond industry and business performance, individual performance remains a key factor in determining increments. Other factors affecting individual increment differentiation are employee potential and compensation positioning.

Top performers are expected to receive 1.7 times the increment given to employees who “meet expectations”. Companies are expected to place fewer employees in the “below expectations” category this year. 

Moving to promotions, the percentage of employees expected to be promoted is likely to increase to 10.2 percent in 2021 from 7.4 percent in 2020, with average additional increment to promotees expected to go up 6.9 percent this year, from 5.4 percent in 2020. 

While most companies are not planning to differentiate increments by employee location, senior/top management employees are likely to get a lower increment of 6.0 percent in 2021. 

Diving into the attrition landscape, the survey found that, at an all-India level, while voluntary attrition reduced from 14.4 percent in 2019 to 12.1 percent in 2020, involuntary attrition (layoffs, restructuring, etc.) increased from 3.1 percent in 2019 to about 4 percent in 2020. Involuntary attrition increased the most in the IT and services sectors, whereas voluntary attrition reduced across these sectors. 

The survey also highlighted the constantly evolving workforce with 16 percent white-collar employees in India belonging to “Gen-Z” and 22 percent of the total workforce being women. 

Beyond correcting the diversity numbers and building an inclusive culture, the top three key priorities for organizations include greater adoption of technology in HR, employee wellness, and continued investment in learning and development.

As hiring picks up across sectors, compensation and benefits will continue to be the top priority for talent, however, going forward talent will take a microscopic view of the holistic offerings. It is no more just about the higher paycheck. 2020 has reinstated the significance of well-being as well as flexibility. Organizations that are able to curate the most lucrative packages with the optimal mix of competitive salaries and a progressive workplace culture are likely to be the ones that are best able to attract, engage, develop and retain talent.

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