India’s economy has grown at the fastest pace in five years in FY2015-16 and as per the Economic Survey 2015-16, it shall continue to grow at more than 7% in FY2016-17. Such advancement in India’s economic fundamentals can be attributed to a combined impact of new government reforms, benignant global commodity prices and RBI’s inflation focus. Under such circumstances, it doesn’t come as a surprise when we observe that 67.6% of the firms have suggested an “improving” outlook towards businesses in India, a 5.7% increase over last year. Moreover, only 5% of the firms suggest a “declining” business outlook.
India, though showing a slight dip, continues to lead the pack for Asia in salary increases – both 2016 and 2017 (projected). All leading APAC nations have observed a decline in salary increases as compared to 2015, however, they are projecting a marginal improvement in 2017.
- India projected an average increase of 10.5% for 2017. Overall manufacturing sector continues to give higher increases than services
- Junior management continues to report the maximum salary increase as compared to other employee categories (10.8%)
The overall year-on-year salary increase for top performers continues to be at 1.7X as compared to the Phase I report last year. However, firms are still making a sharp differentiation between high, average and low performers. The increment grids are widening which reinstates the focus on differentiation in rewards among different levels of performance. Simultaneously, firms are adopting bitter approaches while dealing with low performers in an attempt to categorize it as inadmissible and hence minimal salary increase for them continues to be a trend. This is one of the reason why we see the overall increase for top performers constant as compared to the Phase I report last year.
- Additionally, firms are constantly devoting time and effort to alter their approach towards identifying talent, primarily by distinguishing between high performers and high potentials
- Service sector continues to provide greater differentiation to top raters as compared to manufacturing
Top and senior management salary increases is witnessing the same trend where the increase offered is consistently below India average. The increasing prevalence of ‘Pay at Risk – Variable Pay and LTI’ at these levels is primarily the reason for lower fixed increases. At top and senior management, the actual variable payout for 2016 as a percentage of Total Cost to Company has been reported as 24.3% whereas the overall variable payout across all employee segments is 15.6%. Companies usually resort to higher variable pay at executive levels because of greater correlation between individual and business performance.
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