Salary increase in India amongst highest in APAC

Highest performing employees’ salary increase at 12 percent

BANGALORE: Average salaries across India Inc. increased by 10.8 pct in 2015 as per the latest Towers Watson 2015-16 Asia Pacific Salary Budget Planning report. India is clearly among the front-runners with a 10.8 pct average salary increase, ahead of countries like Indonesia at 9.5pct, China at 8.6 pct and Philippines at 6.7pct. Mature markets will expectedly see lower increases with Hong Kong and Singapore both at 4.5 pct, Australia at 3.5 pct and Japan lowest at 2.5 pct.

“We anticipate the wage bill for companies in India to go up by an average of 10.8 pct in 2015. Favourable economic sentiment in India and a comparative decrease in inflation and oil prices contribute to the real salary increase (net of inflation*) being at 5 pct.” said Sambhav Rakyan, Data Services Practice Leader, Asia Pacific at Towers Watson.

“The overall salary increase in 2014 was 10.5 pct with inflation at 7.2 pct, indicating a real increase of 3.3 pct. So an effective jump from 3.3 pct to 5 pct this year will bring much cheer to Indian employees. While it’s too early to predict increases for 2016, the general sense is that companies will budget in the same range as 2015, perhaps the net increase will be a tad lower given the moderating inflation levels”, Rakyan added.

The survey, timed to coincide with companies’ compensation planning for 2015, looks at a range of industry sectors and job grades from factory shop floor to executive suite. The findings illustrate the challenge to businesses in the region as they seek to balance cost control while continuing to offer salaries sufficient to attract and retain skilled employees

Top Performers Get Higher Salary Increases

The survey found that across all industries in India, almost 87% of respondents plan to allocate a larger portion of their budget to high performers. The High Tech industry stands out with 11 pct companies planning to allocate the entire budget increase to high performers. Predictably, in countries where overall salary increases tend to be higher, good performance is also better rewarded. In India, salary increase for the ‘highest-performing’ employees average 12 pct, which is 30 pct higher than ‘average’ performers and nearly twice the regional average.

“What’s important to note is that base pay/salary is the clear number one attraction & retention driver in India, both for the employer as well as the employee. As salary budgets continue to stabilise, we will increasing see a larger portion of salary budget increases being allocated to high performers and critical skill employees.” said Rakyan. 

Variable Compensation

Deep diving into aspects pertaining to variable compensation, the report highlights that ‘pay for performance’ or ‘pay at risk’ is much lower in India as compared to some other markets. In India, 1.69 months average base salary has been handed as bonus/variable compensation to employees, lower than 1.93 months in China and 1.81 months in Hong Kong, Indonesia, Singapore and Malaysia. This denotes the importance of base pay in India where cash is still king.

Variable Compensation and Employee Level

Further, the variable compensation for Executive Directors and Senior Management in India in 2015 will be at 30 pct and 20 pct of base pay respectively. This is in line with previous years and continues to be higher than individuals in operations and middle management roles, where it ranges from 10 pct to 15 pct.

“It comes as no surprise that people in India still like more guaranteed base pay. This is especially true for individuals at entry to mid-level where hard cash is what they seek. We do foresee a trend where a larger portion of the total compensation, as compared to current levels, would be paid as variable pay, thereby rewarding employee performance and contribution towards improved company productivity and profitability.” added Rakyan.
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