News: Only 40% of firms have given increment in 2020: Survey

Performance Management

Only 40% of firms have given increment in 2020: Survey

Increments were the highest in the life sciences sector and the lowest in the manufacturing and services sector (particularly in the real estate, construction, metals and mining, hospitality, retail, and automobiles industries).
Only 40% of firms have given increment in 2020: Survey

The phase-2 of the 2020 Workforce and Increment Trends survey by Deloitte Touche Tohmatsu India LLP (DTTILLP) provides insights on the impact of COVID-19 on market trends with respect to salary increments, bonus payments, performance management, hiring, and other important aspects of human resource practices in India.

Level of increment

According to the survey findings, only 4 of the 10 surveyed companies in India have given an increment in 2020 and 33 percent of companies have decided not to give an increment at all. The remaining organizations are still undecided. Consequently, for 2020, the average increment at 3.6 percent is less than half the increment of 8.6 percent that employees received in 2019. This number is among the lowest in decades. If we only consider organizations that gave an increment, the average increment in 2020 is 7.5 percent. Less than 10 percent of companies have given an increment equal to or more than 10 percent in 2020 and the proportion of such companies has dropped drastically since the start of the lockdown in March 2020.

The survey points out that the two most important factors that have affected 2020 increments are the timing of increments and the potential impact of COVID-19. Organizations that had already decided their increments before the start of the lockdown in March 2020 have given a higher increment compared with others. Moreover, organizations expecting a decline of more than 20 percent in revenue in FY 2020−21 due to COVID-19 have given much lower increments.

Anandorup Ghose, partner at DTTILLP, said, “Pay increases have been slowing in India over the past few years in line with the trajectory of the economy and rising margin pressures. However, with COVID-19 pulling the global economy into a recession, organizations have had no choice but to reduce or halt increments as they evaluate every incremental rupee spent. When revenues are harder to come by, companies usually go into a cost-saving mode.”

The study finds that actual increments across sectors have been lower than what were projected six months ago. No industry witnessed an average double-digit increment in 2020. Increments were the highest in the life sciences sector and the lowest in the manufacturing and services sector (particularly in the real estate, construction, metals and mining, hospitality, retail, and automobiles industries). Even the digital/e-commerce industry, which is known for giving double-digit increments, has struggled to match its past figures. Also, larger organizations (by consolidated revenue) have given a lower increment compared with relatively smaller companies. They also witnessed a bigger drop in increment due to COVID-19.

Ghose added, “Prior to the lockdown, increment decisions have largely been backward looking with the past year’s performance determining the increment budgets. COVID-19 has brought a big change to the process this year. Organizations are taking into account the likely future performance while deciding increment budgets.”

The survey also asked organizations in India if they plan to give increments in 2021; only 23 percent of companies said yes. Given the uncertainty in the business outlook, most companies across sectors have not taken a definitive stance on 2021 increments yet and will decide on the basis of future performance. Increment decisions of 2020 and 2021 are also intertwined. About 38 percent of companies that gave an increment in 2020 have decided to give increments in 2021 as well.

Other key findings from the Survey

The study finds that apart from managing increments, HR teams are helping organizations save costs by implementing a number of critical measures. These measures include a reduction in promotions; placing fewer employees in the exceeds expectations category; applying discretion while making bonus payouts; cutting discretionary spending; revising incentive plans and pay-mix; and altering HR policies, benefits and allowances.

Organizations are trying to make-up for lack or reduction in financial rewards by investing in work-from-home enablers as well as digital learning, development, and engagement of employees. Best-in-class organizations are providing employees additional allowances for buying ergonomic office furniture and COVID-19 essential kits. Keeping the morale of employees up has also been another big focus area for organizations. Organizations are trying to keep employees engaged in this virtual environment through virtual leadership connects, emotional and mental health counseling, and fitness sessions.

The 2020 DTTILLP Workforce and Increment Trends survey was launched in June 2020 as a B2B India-specific survey. The primary audience for this survey was seasoned HR professionals. About 350 organizations participated in this edition spread across seven sectors and 25 sub-sectors. The voluntary survey was conducted through Deloitte’s proprietary online tool. The responses received from the participants were validated and checked for accuracy and intended interpretation. India, wherever mentioned in the document, reflects the collective views of only the survey participants.

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Topics: Performance Management

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