A report reveals Indians will see 10 per cent increase in their salary in 2017; Top performers will be top priority

As per a new report, salaries in India are projected to rise 10% in 2017, same as the actual increase in 2016.

The 2016 Salary Budget Planning (Q3) Report released by the global advisory, broking and solutions company Willis Towers Watson noted that India’s 2017 projected salary increases are highest when compared to developed and key emerging markets in the region.

Indonesia at 9%, Sri Lanka at 8.9%, China at 7% and the Philippines at 6.4% are the other countries that make up the top five in this group. Salaries in developed markets such as the US and the UK have projected increases in the range of 3%.

Salaries were projected to rise 10.8% in 2016, but in reality rose just 10% - the second time below projected increases since 2015. If that pattern continues in 2017, the report said, Indian employees could see a single digit salary increase for the first time since 2011.

The report also shows that once average inflation for India of 5.7% is taken into account, the projected increase in real terms for 2017 will be 4.3%, down by a fraction from 4.4% in 2016.

The report, designed to provide companies with guidance for their annual salary forecasting for the year ahead, covered various sectors including technology, financial services, pharmaceutical and health sciences, chemical, energy and natural resources, media, retail, construction and engineering, transportation and consumer goods.

The Willis Towers Watson report showed that, with tighter salary increase budgets, organizations very discernibly prioritize their top performers. Similar to trends in the Asia-Pacific region, the report indicated that in India, 38% of the budget for salary increases goes to the top performers. Another 34% is shared by above average performers while the remaining 28% of the budget goes to average performers.

Sharing his perspective on the findings, Sambhav Rakyan, Data Services Practice leader at Willis Towers Watson said, “The data clearly shows a greater emphasis on rewarding high performers rather than across-the-board increases for all workers. Without such differentiation, companies will face pressure in attracting and retaining talent, especially for in-demand areas. Employers have to think beyond inflation-linking and look at more nuanced factors such as affordability, growth expectations, both employee and company performance, and specific talent and skills needs.”

Rakyan added that, as the available budget shrinks, companies need to be smarter about how they use them to retain talent. “It’s important to prioritise the best performers and also to review how employees are rewarded with other incentives, such as more attractive benefits,” he said.

Sector trends

The pharmaceutical sector continues to project higher salary increases as compared to most other sectors at 11%, while the financial sector will likely remain well below average at 8.5%. The projected salary increase in the high tech sector for 2017 is likely to be the same as the previous year at 10%.

Willis Towers Watson also noted that companies need to rethink whether annual base salary increases are the best way to reward employees. There may be alternatives worth considering to better meet their needs and reflect their contribution.

Highlighting the need for increased transparency in communicating pay, Rakyan said, “Companies need to be transparent about communicating the rationale behind salary increases and performance benchmarking. In our experience, employees appreciate this.”