The phase-II of a survey done by Deloitte Touche Tohmatsu India LLP (DTTILLP) on 2020 Workforce and Increment Trends, reveals that the average increments in India fell from 8.6% in 2019 to 3.6% in 2020. 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 pays design.
As per Deloitte press release, only 4 out of 10 surveyed companies in India have given an increment in 2020, while 33 percent of companies have decided to not give increment at all. The remaining organizations are still undecided. The increment percentage this year is among the lowest in decades.
If we only consider organizations that gave an increment, the average salary increment in 2020 is 7.8%, this projection is 40 basis points lower than that received by employees in 2019, which was 8.2%. Less than 10 percent of companies have given an increment equal to or more than 10 percent in 2020. However, the proportion of such companies has dropped drastically since the start of the lockdown in March 2020.
Factors affecting increment in 2020
The survey reveals that the two most important factors that have affected 2020 average salary increments are the potential impact of COVID-19 and the timing of increments. The companies that had decided their increments before March have given higher increments as compared to the ones who had to decide after the start of the lockdown. Also, the organizations expecting more than 20 percent decline in revenue FY 2020-21 due to the lockdown have given much lower increments.
“Pay increases have been slowing in India over the past few years in line with the trajectory of the economy and rising margin pressures. However, with COVID-19 pulling the global economy into a recession, organizations have had no choice but to reduce or halt increments as they evaluate every incremental rupee spent. When revenues are harder to come by, companies usually go into a cost-saving mode”, said Anandorup Ghose, Partner at Deloitte India.
Average Salary Increments across different sectors in 2020
The actual increments across sectors have been lower than what were projected six months ago. No industry could follow up to its projected increment in 2020. Increments were the highest in the life sciences sector and the lowest in the manufacturing and services sector, particularly in the real estate, construction, metals and mining, hospitality, retail, and automobiles industries. Even the digital/e-commerce industry, which is known for giving double-digit increments, has struggled to match its past figures.
Projected salary increments for FY 2021-22
The survey reveals that given the uncertainty in the business outlook, while most companies across sectors have not taken a definitive stance on 2021 increments yet and will decide on the basis of future performance, only 23 percent of the companies plan to give increment in 2021. Around 38 percent of the companies that have given increments in 2020 has decided to give increments in 2021 as well.
Other key findings
Other key finding of the survey includes that apart from managing increments, HR teams are helping in saving costs of organizations by implementing a number of critical measures. The measures include a reduction in promotions, applying discretion while making bonus payouts, placing fewer employees in exceeds expectations category, cutting discretionary spending, altering HR policies related to benefits and allowances, and revising incentive plans and pay-mix.
“The past couple of quarters have been extremely challenging, particularly for HR teams in most parts of the world that have had the difficult task of managing employee expectations while ensuring the health, safety, and productivity with ever-shrinking budgets. It is great to see HR leaders respond to this crisis with resilience and innovation,” said Anandorup Ghose.