India Inc plans to reward employees with double-digit increments

News Posted - 2010-02-11

Salaries across India Inc are expected to rise at a healthy pace this year as draught of strong economic growth lifts consumer sentiment and spurs corporate boards into rewarding key people and hire exciting talent. Initial indications are that employees across sectors may get moderate-to-fat increments and salary hikes in the 9-18% range this year around. No more gloomy messages of pay-cuts, layoffs and heightened austerity measures; instead there is a buzz of promising bonuses, although this may not match the 2007-08 euphoria levels.

Key executives in companies belonging to telecom, retail, FMCG, automobiles and consumer durables are already contemplating a healthy hike for employees with industry fortunes turning better and the future looking promising. “If we take a realistic look on expected sa lary hikes this year, it is surely going to be around 9-9.5% across sectors,” said Sandeep Chaudhary, performance and rewards consulting practice leader at Hewitt Associates. “Companies will focus on a more realistic approach towards salaries, as well as hiring,” he added.

The hikes, in some cases, are simply a function of industry dynamics. In others, it is a mixture of desperation and hope.

The auto industry grew at a rapid pace last year and was one of the first to benefit from an increase in demand. With competition increasing and a slew of launches being planned, companies are leaving nothing to chance. Market leader Maruti Suzuki is looking at a 10-15% hike, up from last year’s 8-10%. It also plans an average bonus payout of 100% across levels like last year. “It will be an extremely challenging period in terms of retaining and hiring people. We are beefing up our R&D capabilities and need resources in other segments of the business too,” said SY Syddiqui, managing executive officer (administration, HR, finance & IT), Maruti Suzuki India.

The aviation industry was brutally savaged last year. With air travel picking up, companies are hoping to reward disgruntled employees, who put up with a 15-20% average salary cut in 2009. Airlines also have to contend with poaching from rivals, which is a big issue in this sector.

But when it comes to bonuses, there’s nothing to beat what mobile telcos have been offering. Companies like Bharti Airtel, caught in a bitter tariff war, had offered its junior-level employees (with 2-3 years experience) an average of 140-150% bonus last year, while people at the senior level (with 15-20 years experience) received an average bonus of 125%.

There were also some cases of bonuses of 160%. Bharti employees expect to get a 10-15% raise this time, compared with 8% last year. A final call will be taken after a salary survey in April. “We take a call on the quantum of increase based on what our competitors offer. Since we hire from sectors like telecom, banking, FMCG and IT, we benchmark our salaries accordingly,” said Krish Shankar. Mr Shankar has good reason to sound guarded. The entry of several new players is expected to propel salaries to new highs, a nightmarish scenario considering what is happening to their tariffs.

Source: Economics Time 2/2/2010