Average Salary Hikes In India Falls To 3.6% In 2020-21: Deloitte Survey

Companies gave an average salary hike of 3.6% in 2020-21 compared to 8.6% in the previous financial year amid the coronavirus pandemic, according to a survey.

The survey by Deloitte Touche Tohmatsu India LLP showed that timing and potential impact of Covid-19 were the two most important factors that affected increments in FY21. "Organisations that had already decided increments before the start of the lockdown in March 2020 have given a higher increment compared with others,” according to the survey. “Moreover, organisations expecting a decline of more than 20% in revenue in FY21 due to Covid-19 have given much lower increments.”

India imposed a nationwide lockdown on March 25 to curb the pandemic, stalling all but essential goods and services in the country. Restrictions were eased by May end but localised lockdowns continue in the wake of surging coronavirus cases.

The second phase of the 2020 Workforce and Increment Trends survey was launched in June 2020 as a B2B India-specific one. About 350 organisations participated.

"Only four of the 10 surveyed companies in India have given an increment in 2020, and 33% of companies have decided not to give an increment at all. The remaining organisations are still undecided. Consequently, for 2020, the average increment at 3.6% is less than half the increment of 8.6% that employees received in 2019. This number is among the lowest in decades," the survey said.

In this case, 2020 and 2019 refer to financial years 2020-21 and 2019-20, respectively.

Deloitte noted that if only organisations that gave an increment are considered, then the average salary hike in 2020 is 7.5%. "Less than 10% of the companies have given increment equal to or more than 10% in 2020, and the proportion of such companies has dropped drastically since the start of the lockdown in March 2020," it added.

According to the findings, actual increments across sectors have been lower than what was projected six months ago, and no industry witnessed an average double-digit hike this fiscal. “Increments were the highest in the life sciences sector and the lowest in manufacturing and services sector. Even digital/e-commerce industry, which is known for giving double-digit increments, struggled to match its past figures.”

Also, larger organisations gave a lower increment compared with relatively smaller companies. They also witnessed a bigger drop in increment due to Covid-19.

According to the survey, HR teams are helping companies save costs by implementing several critical measures, including a reduction in promotions, cutting discretionary spending, and revising incentive plans and pay-mix.

Anandorup Ghose, Partner at Deloitte Touche Tohmatsu India LLP, said pay increases have been slowing in India over the past few years—in line with the trajectory of the economy and rising margin pressures.

"Prior to the lockdown, increment decisions have largely been backward-looking with the past year's performance determining the increment budgets. Covid-19 has brought a big change to the process this year. Organisations are taking into account the likely future performance while deciding increment budgets," Ghose said.

Given the uncertainty in the business outlook, the survey said most companies across sectors have not taken a definitive stance on 2021 increments yet and would decide based on future performance.