The lower salary increment, as compared to the preceding year, is in line with the higher margin pressure on companies, economic headwinds, and the need to gradually slow white-collar pay growth in India to become more globally competitive, Deloitte India said.
"Companies in India are likely to give an average salary increment of 7.8 percent to employees for 2020-21. This projected salary increment is 40 basis points lower than the actual salary increment of 8.2 per cent that employees received in 2019-20," the survey report, titled 'Workforce and Increment Trends Survey', said.
Anandorup Ghose, partner at Deloitte India, said, "There has been a lot of debate on pay increases over the past few years and there is a need for greater responsibility in this process of salary budgeting as compensation cost ratios are increasingly becoming a sore point in boardrooms across the country."
Ghose also said the talent market priorities are different from what they were five years ago, and companies' pay budgeting process and data needs to reflect that.
The survey found that almost 50 per cent of the companies surveyed are projecting a salary increment of less than 8 per cent for 2020-21 and only 8 per cent companies are expecting to offer pay increases greater than 10 per cent.
More than 30 per cent of the respondent companies, the report said, differentiate increments by levels of management.
The projected salary increments for 2020-21 are expected to be the lowest in industries such as infrastructure and real estate, non-banking financial companies (NBFCs) and telecom, the report said.
"To manage overall cost budgets, organisations focus on differentiation. Performance and potential differentiation remains the central theme according to the survey. Ninety per cent companies differentiate pay increases on the basis of past-year performance and 34 per cent companies focus on differentiating pay based on potential.
"As the bell curve for companies has become sharper (with only 7 per cent employees achieving the highest rating), the differentiation in pay is almost 1.7 times the pay increase for average performers," the survey said.
The survey also found that at an all-India level, voluntary attrition slightly reduced in the current financial year to about 15 per cent, involuntary attrition (layoffs, restructuring, etc) has increased to 20 per cent of the total attrition.
Involuntary attrition increased the most in the automobile, insurance, and NBFC sectors. The survey findings also corroborated the increasing impact of automation on the workforce with companies showing reduced hiring levels, it added.
The audience for the survey was HR professionals. About 300 organisations spread across 7 sectors and over 20 sub-sectors participated in the survey. The survey provides insights and market trends on salary increments, performance management trends, and information on emerging realities in the area of workforce composition and pay design, Deloitte India said. ABI HRS