9-10% hikes may not help beat inflation

livemint.com:

Mint had reported earlier after speaking with several consultants including Aon, Mercer and Willis Towers Watson (WTW) that Indian companies are likely to offer median increments of 9-10% this time, with macroeconomic pressures pushing companies to be more prudent. In fiscal year 2023 (FY23), the median remuneration had risen 9.5% on average, the highest since FY20 (9.7%), a Mint analysis of Sensex companies showed. However, in 2019-20 (before covid), the average annual inflation was far lower, at 4.8%.

In FY23, it was at 6.7%, blunting salary increases. So far in FY24, inflation has softened to 5.4%. “Mostly, salary hikes are subdued when the organization’s or sector’s performance is not good, or the outlook is not great.

In both situations, organizations tend to be conservative," said Rajul Mathur, consulting leader (India) and work and reward and growth leader (international), WTW. The manufacturing, engineering, retail and pharma industries could provide marginally higher salary hikes, while information technology (IT) employees could bear the brunt of reduced budgets, Mint reported earlier, citing data from Aon. While engineering companies might roll out a 10% average hike in 2024 compared to 10.5% in 2023, the energy sector may see an 8.8% rise in 2024 versus 8.5% this year, Aon’s early data analysis showed.

Salary hikes for fast-moving consumer goods, chemicals and retail are likely to be at 9.8%, 9.6% and 10.1%, respectively, which are par compared to 2023’s increments of 9.7%, 9.6% and 10.1%. Mathur of WTW said salary hikes are a function of an individual’s performance and potential, the organization’s performance and plan and the impact of market forces. “Besides, 9-10% is a median range.