India Inc to shell out 10.8% salary hike to staff in 2016, but inflation can play spoiler: Report

Even as Indian employers are likely to dole out an average salary hike of 10.8 per cent to their staff in 2016, as per Towers Watson report the inflation can play spoiler by adversely affecting the increments.

"India is expected to see an overall projected salary increase of 10.8 per cent. Factoring inflation at 6.1 per cent, the net salary increase in 2016 is expected to be marginally higher at 4.7 per cent as against 4.5 per cent last year, when inflation was at 5.9 per cent," said the Towers Watson 2015-16 Asia-Pacific Salary Budget Planning Report.

Notably, the projected higher overall salary increases are despite the fact that around 58 per cent employers in the third quarter are less upbeat on the business outlook for India than they were in the first quarter, the report points out.

"India Inc needs to be smart about how to use limited salary budgets, because high volatility and talent crunches are causing frequent shifts to pay," Sambhav Rakyan, Data Services practice leader Asia Pacific at Towers Watson, said.

"Employers may be bearish in thinking there is a weak business outlook given the current poor market data, but the case is the opposite for employees, who hold bullish expectations for salary rises. Employers will need to carefully manage employees' longer term expectations, if they are to achieve a content workforce," Rakyan added.

Meanwhile, across employee levels, the "top performers" are likely to get higher increases averaging 12.5 per cent, while "above average" and "average" performers may get 11 per cent and 9.7 per cent raises, respectively.

"To reward employees based on their performance, offers them a great incentive and also reflects growing market maturity. It also shows rising competition for talent," he said.

Sector-wise, the energy sector has the highest actual projected salary increase in 2016 at 11.5 per cent, followed by the high tech sector at 10.7 per cent. While for the financial services sector, which has traditionally seen higher pay increases, it would be a modest 10.4 per cent.

Meanwhile, salary budgets in APAC region are set to rise 6.8 per cent in 2016, higher than 6.6 per cent in 2015. But once inflation is factored in, average increases will be 3.4 per cent next year, compared to 4.1 per cent this year.

The survey noted that in 17 of the 22 Asia Pacific markets covered by the survey, employees will go home with less money next year.

In East and Southeast Asia, the biggest overall increases for 2016 will be in Vietnam (10.4 per cent), Indonesia (9.4 per cent) and mainland China (8 per cent)-- all higher than last year.

However, once the inflation is taken into account, real increases in these countries drop to 3.9 per cent, 5.6 per cent and 5.8 per cent respectively.

(Image credit: BCCL)