However, those employed in consumer-facing industries such as automobile, retail and manufacturing are expected to be insulated and some segments may even earn 0.5-1% higher increments than estimated. Top performers may get 1.8 times the hike of peers, as high attrition rates continue to be a challenge for companies.
According to industry experts, the hikes could be in the range of 9-10%, instead of the 10%-plus increments had the downturn not happened.
“We expect the steepest drops to be in the obvious sectors like technology —product and service companies, as well as consumer technology, besides e-commerce organizations. In these segments, you will see 150-200 basis points decrease in projections," said Anandorup Ghose, partner, Deloitte India. These sectors had witnessed the sharpest salary hikes in the last couple of years.
“The sectors that are aligned to global markets like IT, financial services, and e-commerce, may witness more muted increments compared to 2022, given the impact of a global recession and the slowdown," Roopank Chaudhary, partner at Aon India for human capital solutions, said.
According to consulting firm Aon’s Salary Increase Survey in September, Indian employers were gearing up to boost salaries by 10.4% in 2023 nearly matching current year’s 10.6% actual increase. However, India Inc. has to factor in attrition, which continues to plague companies across sectors, and may not rework budgets drastically.
“Overall, attrition remains high in many sectors. Hence, companies will be forced to give better hikes to retain their workforce," Chaudhary added.
“Companies also want to bring in internal salary parity, because in the last one year, those who came from other firms were offered salaries that were much higher than those working with the firm," said Rajul Mathur, consulting leader, India, and growth leader, international, work & rewards at Willis Towers Watson (WTW).
WTW estimates median salary to be at 10%, similar to 2022, despite the “downward market sentiment". In fact, consumer-facing firms will have to boost increments to realign salaries with a strong business performance.
Fast moving consumer durables (FMCD), FMCG (fast moving consumer goods), realty, hospitality and cement, which rely on domestic demand and consumption, may see higher than projected increments, said Aon.
“We expect service and consumer companies to see some improvement in their hikes by 50-100 bps (sectors that did not see moderate or low hikes over the last few years). Manufacturing is expected to remain largely flat with some minor swings depending on the sub-sector," Ghose added.
Declining wholesale price index (WPI) and consumer price index (CPI) inflation will also play a role in salary hikes. WPI inflation rate fell to the lowest in 21 months signalling easing price pressures, while retail inflation eased to a 11-month low of 5.88% in November from 6.77% in October, amid cooling global commodity prices and higher borrowing costs.
“Globally, inflation levels have created a lot of pressure on pay increases and while most countries and companies haven’t responded by increasing at the same rate, in India this pressure was also anticipated. However, if the trend continues, we will potentially not have to contend with this when companies think of moderating their hikes," Ghose added. For sectors such as IT, where wage costs account for 65-70% of expenses, rising inflation is a cause for worry. According to the September quarter earnings data, wage cost as a share of revenue fell at Tata Consultancy Services Ltd and HCL Technologies Ltd to 56.1% and 54.6%, respectively, while at Infosys, it was flat at 53.2%. Meanwhile, multinational companies, following a January-December calendar, will have to decide on their salary budgets immediately, while lot of Indian companies who typically firms up the budgets after April will have time to take a more considered call on pay hikes.
