India to see average salary increase of 6.4% in 2021: Survey

New Delhi: Salaries in India are projected to rise by an average of 6.4% in 2021, marginally higher than the average actual increase of 5.9% in 2020, according to a Willis Towers Watson survey.

According to Willis Towers Watson’s latest Salary Budget Planning Survey report, an average salary increase of 6.4% in 2021 translates to a median increase of 7%.

“As companies in India respond to the economic implications of the COVID-19 crisis, there is an increased optimism on business recovery, but it is yet to translate into the salary increment budget,” said Rajul Mathur, Consulting Head – Talent & Rewards, Willis Towers Watson India.

Mathur further said that with compensation budgets lower than previous years, companies are likely to prioritise allocation towards protecting critical and high skilled talent.

“Through 2021, we can continue to expect greater emphasis on pay for performance and pay linked to business output,” Mathur said.

According to the survey, on average, 20.6% of the salary increase budget is being allocated to top performers, which represent 10.3% of the employees in India.

“This implies that for each Re 1 allocated to an average performer, Rs 2.35 is allocated to a top performer and Rs 1.25 is allocated to an above average performer,” the survey said.

The survey further noted that median salary increase at the executive level for 2021 is projected at 7%, a slight decline from 7.1% in the previous year.

For middle management, professional and support staff, a decrease from 7.5% in 2020 to 7.3% in 2021 is projected.

The Salary Budget Planning Report is compiled by Willis Towers Watson’s Data Services Practice. The survey was conducted online in October/November 2020 and received over 18,000 sets of responses covering over 130 countries worldwide.

A comparison of projected salary increases across key markets in Asia Pacific this year shows that Indonesia is projected at 6.5%, China at 6%, Philippines at 5%, Singapore at 3.5% and Hong Kong at 3%.

Of the surveyed companies in India, 37% have projected a positive business revenue outlook for the next 12 months, up from 18% in Q3 2020. However, recruitment is yet to pick up.

The study showed that only 10% of the organisations in India plan to add new headcount compared to 14% last quarter.

A sector-wise analysis shows that, high tech, pharmaceuticals and consumer products and retail, project a median salary increase around 8% — more than the general industry projection.

The financial services and manufacturing sector projects a 7% increase in 2021, while the BPO sector is at 6%. The energy sector is expected to see the lowest increase of 4.6%.

“All sectors witnessed varying levels of impact due to COVID-19. Some sectors such as hospitality, aviation, travel and tourism were hit harder than the others. Sectors such as pharma, FMCG, e-commerce and high-tech have experienced growth and this is reflective in their hiring plans and salary budgets for 2021,” said Arvind Usretay, Director, Rewards, Willis Towers Watson India.