The Days of Double Digit Salary Hike in IT Industry are Over: Aon Survey

by February 22, 2017 0 comments

 

Key highlights:

1. Demonetisation has had an impact on industry, but to what extent is still not clear

2. Donald Trump remains a threat to Indian IT professionals aspirations.

3. Brexit was a shock and ripples are to be felt across industry.

4. Companies shall keep costs under check by not increasing salaries at lower levels. This is where 86% of budget salary costs go.

5. However, top talent across industries shall still command a premium.

 

The continuing economic downturn alongwith political uncertainties across India and the globe, and also shock events such as Brexit, demonetisation and the rise of Donald Trump mean that IT pros and also those belonging to other industry verticals must learn to adapt to single-digit salary hikes in future. This was amongst the primary findings of the annual Salary Increase Survey in India, released by Aon Hewitt.

The reduction in salary hike percentages represents a sign of maturing of Indian organisations and also point to the fact that unlike IT in the 90s and 00s and also eCommerce in early 10s, there’s now no new big industry that’s coming up which also has the potential of attracting top talent.

The survey projects a 9.5% salary increase on an average across industries, with the IT industry performing even worse at 8.7%. This represents a percentage point drop since 2016. If you consider consumer price inflation (CPI) numbers than the inflation adjusted hike is negligible. However, this is not the case for above average or brilliant performers or top talent who still cloud expect to see 1.8 times the salary hike in percentage terms as compared to average performers.

The new technology sectors or those where there’s increased industry focus these days, such as Life Sciences, Chemicals, Automotive and FMCG shall perform better as compared to IT, however, the expected salary increase there shall still be lower as compared to last year.

“Political changes and economic headwinds have had an impact on business performance,” said Anandorup Ghose, partner at Aon Hewitt India. “However, the trend this year reflects a gradual slowing of pay increases and higher emphasis on productivity and performance – quite literally a ‘graying’ of salary budgets for India,” Ghose added.
A key point mentioned by Ghose is that the continued demand-supply mismatch in India is the reason why we should expect higher salary increase across the board as compared to counterparts in the Asia Pacific region. Another key pointer is that variable pay component in Indian salaries is still amongst the lowest across the globe. This includes the variable pay or participation in business profits offered to the senior management.

The attrition rate amongst services companies that includes IT services companies was around 18%. Interestingly, the non-voluntary (termination) attrition out of this stands at 20%, which is still under control considering the state of economy.

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