India to lead salary hikes in Asia-Pacific

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Double-digit salary hikes are back. In a sure sign that the economy has returned to the path of high growth, India Inc is projected to give its employees an average pay raise of 10.6% in 2010 — the highest in the Asia-Pacific region — according to a survey conducted by global HR consultancy firm Hewitt Associates. The average raise in 2009 was 6.6%.

The highest hikes, surprisingly, are expected in domestic companies — 11.4%, as compared with 10.2% in MNCs. “Energy, telecommunications, pharmaceutical, EPC (engineering, procurement and construction) and automotive are among sectors projecting highest increases ranging from 11.6% to 12.8%, the survey said.

It said technology and outsourcing sectors had shown tremendous recovery over 2009, but were still likely to play cautiously with single digit increases in the range of 8.5% to 8.9%.

The survey covered 465 companies across 20 primary industries in the country. Sandeep Choudhary, leader of Hewitt’s performance and rewards consulting practice in India, said, “The economy has shown faster recovery in sectors relying on domestic consumption while recovery in those which have global dependence is expected to gain speed by mid-2010. This growth and fact that 2009 saw a lot of salary freeze and cuts, are providing an impetus for healthy increase in compensation for employees.”

Other Asia Pacific countries including China, Japan, Singapore, Australia and Thailand are projected to get single digit salary hikes in the range of 2.1-6.7% in 2010, Hewitt said.

In keeping with the growth sentiment, the number of Indian companies that plan to keep a freeze on fresh recruitment is expected to drop to 6.6% from 29.4% last year. Layoffs are also expected to fall to 3.5% this year from 16% in 2009. The attrition rate in the country was 15.4% in 2009 with voluntary attrition of 12.9% and involuntary exits of 3.1%.

Choudhary said a majority of Indian companies, particularly those in infrastructure and energy sectors, are planning to hire in a big way this year. “About 93.4% of the firms surveyed are expected to hire this year,” he said. Firms in sectors like telecom, oil and gas and infrastructure are likely to recruit the most, across lateral and entry levels, said the survey.

A host of IT companies, including TCS, Infosys, Wipro and Mahindra Satyam, have recently announced hiring plans. According to one estimate, the IT sector will hire around 1.5 lakh people in 2010-11.

Banking and financial services have seen positive recovery as well, with salaries projected to increase at 10.5% this year, the survey said. This is the sector that was most adversely impacted by global recession and had announced minimal bonuses coupled with salary freezes.

The Indian retail sector, which was hit by weak consumer sentiment, tight credit situation and unhealthy cost structures, has bounced back too, investing in compensation with a 11.1% projected salary increase for 2010.

The survey pointed out that the one definitive change in compensation philosophy reinforced is the performance and reward linkage, with top performers receiving twice as much salary increase as compared to average performers. In keeping with the focus on cost and performance, variable pay as part of total compensation continues to grow, with 24.8% of top executive pay coming through this route and even the lowest rung officer cadre getting 11.3% of their salary in variable compensation.