Companies in India are likely to give an average salary increment of 7.8 percent to employees for 2020, according to Deloitte India’s 2020 Workforce and Increment Trends Survey. 

As compared to the salary increment received in 2019, this projected average salary increment for 2020 is 40 basis points lower. The decrease from 8.2 percent increment in 2019 to 7.8 percent in 2020, is a result of higher profit margin pressures on companies, economic turmoil, and the trend towards reducing white-collar pay growth in order to become globally competitive. 

“There has been a lot of debate on pay increases over the past few years and there is a need for greater responsibility in the process of salary budgeting as compensation cost ratios are becoming a sore point in boardrooms across the country,” said Anandoroup Ghose, Partner, Deloitte India. “The talent market priorities are different from what they were five years ago, and our pay budgeting process and data needs to reflect that.” 

Even though the salary increment figure reflects an overall simple average, when the salary increment is adjusted for the company headcount, the salary increment decreases from 7.8% to 7.1%. At the same time, when the IT sector is excluded, the headcount weighted projected pay increase drops even further to 6.8 percent. This shows that larger companies have started to become more cautious when it comes to salary increments. 

According to the study, about 50 percent of the organizations are projecting a salary increment of less than eight percent for 2020 and only eight percent companies are expected to offe their employees an increase of more than 10 percent. 

“Salary increments in India are likely to transition from a more classical rule-bound approach to one which is far more based on individual performance and skills,”said Anandorup Ghose. “The level as well as the change in compensation is likely to reflect the pace of learning and accumulation of skills required for the job.” 

Salaries for job roles that blend functional knowledge with technology are the ones most likely to drive a significant premium as salary decisions will be based on skills that employees bring to the table, added Ghose. 

At present, the focus area for most companies is to manage overall cost budgets and realign on performance and potential differentiation with 90 percent of the companies differentiating pay increases on the basis of last year’s performance. Fairness of pay among employees has become another focus area for companies who are offering higher increments to employees who are currently underpaid as per their roles. Also, more than 30 percent of the companies differentiate increments by levels of management with top/senior management level employees getting two-thirds of the increment given to middle management level employees. 

Key takeaway

As India Inc. evolves and tackles the workforce of Industry 4.0 with about 74 percent of the workforce engaged in white-collar jobs, the need of the hour is to ensure that the workplace is fair in terms of salaries offered to men and women across different sectors. Moreover, even though the drop in pay increase projections has been consistent across various industries, the manufacturing sector has witnessed the sharpest downturn over the past few quarters. While the IT sector and e-commerce firms are expected to provide a double-digit increase in salaries. As the focus shifts towards automation and digitization, the skills in these industries are in high demand across the board. 

Thus, the salary increase projections point towards a rising trend of high demand for talent skilled in fields such as automation and digitization.