Indian Cos to hike the salaries this yr

Double-digit salary hikes are likely to be back this year in India with employees expecting an average hike of 10.6% in 2010, the highest in the Asia Pacific, according to a survey conducted by HR consulting firm Hewitt Associates.

The average salary increments had shrunk to just around 6% last year (from around 15% in 2007) as the economic slowdown hit India Inc’s bottomlines.

According to the survey, while the overall average in India will be around 10.6%, Indian-owned companies are expected to outperform multinationals this year, offering better salary hikes. Indian companies are expected to give an average salary hike of about 11.4%, compared to MNCs, which are likely to give hikes of around 10.2%.

“Organisations in India are positive and are looking at measured, realistic growth,” points out Hewitt Associates leader of performance & rewards consulting practice in India Sandeep Chaudhary.

The economy has shown faster recovery in sectors that rely on domestic growth and consumption, while recovery in sectors that have global dependence is expected to gain speed by mid-2010, he says, adding, “This growth, and the fact that 2009 saw a salary freeze and cuts, are providing the impetus for a healthy increase in compensation for employees.”

Moreover, while last year, inflation shot up to nearly 11%, the actual hike of 6.6% brought employees little relief. But this year, inflation is expected to average at 9.6%, which would mean some comfort for Indian employees this year.

The survey also revealed that companies in India will make sure that salary hikes are the best in the APAC region. Projections indicate that other APAC economies like China, Malaysia, Philippines and Thailand are expected to give salary hikes ranging between 4.7% and 6.7%. Indian companies are the only ones in the APAC region that are expected to give a double-digit salary hike.

The survey, which covered more than 460 organisations in India, also pointed that sectors such as infrastructure, power, telecom, pharma, and automotives are expected to give above average salary hikes in the 11.6%-12.8% range.

According to Hewitt, increased privatisation in the power sector, the government’s focus on investment and stimulus in infrastructure, coupled with increased competition in telecommunications have earned these sectors the highest salary increases of 12.2-12.8% this year. These are closely followed by steady performers like pharmaceuticals, at 12.1%.

Also, the automotive sector has sprung back into action with increased demand and sales over the past two quarters and is strongly positioned to give out an 11.6% average salary increase for 2010, the survey added. Moreover, the biggest recoveries are expected in knowledge segments such as IT, banking, financial services & insurance (BFSI), engineering, procurement & construction (EPC) and the retail sector, which had given marginal increments of about 4-5% last year.

These sectors are expected to at least double their percentage hikes in 2010. IT, for instance, is expected to give an almost 9% salary hike to its employees, compared to the actual average hike of 2.9% last year. IT major Infosys, too, has announced that it will give salary hikes across the board to its employees next month. The increments are expected to average around 7-8% for Infosys’ employees.

Similarly, BFSI, which gave a 5.1% salary increase last year, is expected to double the hikes to about 10% this year. Ditto for companies in the Indian retail sector, which are expected to give an average hike of over 11% this year.

“Last year, retail which was hit by weak consumer sentiment, tight credit situation and unhealthy cost structures, has managed to bounce back, investing in compensation with 11.1% projected salary increase for 2010,” said Mr Chaudhary. Meanwhile, technology and outsourcing sectors, which have seen a big positive swing from 2009, still give among the lowest salary increases at 8.9% and 8.5% respectively.

At the managerial levels, while the top management may walk away with more than an 9% average hike, junior and middle management employees are expected to get salary increases between 10.5% and 10.9% this year