Salary prospects better in 2003: Hewitt Study

Employees saw lower salary increases in 2002 compared to 2001, but a rebound is expected in 2003, according to the "Seventh Annual India Salary Increase Survey," conducted by global HR outsourcing and consulting firm, Hewitt Associates.

Hewitt surveyed 374 foreign-owned, locally-owned and joint-venture organisations across 20 industries, and found that average salary increases across employee groups (senior/top management, manager, professional/technical/supervisory, clerical and support, and manual workers) ranged from 7.7 per cent to 10.9 per cent in 2002. This is lower than 2001, when salary increases were between 10.2 per cent and 14.5 per cent, on an average.

The Hewitt study anticipates average salary increases will range between 8.5 per cent and 11.4 per cent across all employee groups in 2003, which is slightly higher than 2002 increases. Additionally, only 4 per cent of all survey respondents indicated the possibility of a salary freeze in 2003, compared to 11 per cent in 2002.

Ravi Virmani, Hewitt's managing director for South Asia, said, "The slight recovery in salary increases in India when compared with levels in 2002 indicates an improvement in the economic outlook, as well as projections by companies across the Asia-Pacific region for higher average salary increases next year."

He also mentioned that India was moving fast towards integration with the global village, talent mobility was gaining in strategic importance and Indian organisations were rapidly aligning their pay levels both regionally and globally. Nishchae Suri, measurement practice leader for Hewitt in South and West Asia, adds that changes in the income tax regulatory framework in India was likely to increase tax outflows by the salaried class. "Organisations are attempting to gross up for that loss," Suri said.

The highest average salary increases for 2002 were awarded to employees in the professional/supervisor/technical group (10.9 per cent) for the third year in a row. This same employee group is projected to earn the highest salary increases in 2003 (11.4 per cent).

Specifically, employees in the IT-enabled (12.6 per cent), software development (11.2 per cent) and accounting/consulting/legal (10.9 per cent) industries saw the highest average salary increases in 2002. In 2003, employees in the IT-enabled industry are expected to receive the highest average salary increases (12.7 per cent), followed by those in software development (12.3 per cent) and IT solutions (11.3 per cent).

On the other hand, industries where employees received the lowest average salary increases across all levels in 2002 were chemicals (8.1 per cent), automobile/ancillaries (8 per cent) and banks (5.7 per cent). Employees in the banking industry are expected to receive the lowest average salary increases in 2003 (5.6 per cent), followed by those in entertainment/communication/publication (6.9 per cent) and chemicals (7.4 per cent).

Explaining the reason for the variations in salary increases, Suri said, "Banks already paid high salaries in absolute terms. The IT-enabled, software development, and accounting/legal industries are all currently in a high-growth phase and the talent pool is far more mobile and dynamic than, for example, bank and chemicals industries, which are relatively stable and mature." To that he added, "Furthermore, the philosophy towards pay should be considered, and organisations in the chemicals and auto industries are traditionally conservative paymasters, as opposed to, say, the IT-enabled industry."

The Hewitt study also found that India continues to strengthen the linkage between performance and rewards. The results revealed that an outstanding performer earns, on average, nearly twice the salary increase earned by an average performer. The ratio increased in 2002, compared with 2001, when an outstanding performer received 1.72 times higher salary increase than an average performer. The Hewitt data suggests this trend will continue and increase in 2003.

"As corporate revenues and budgets stagnate or even reduce, and talent attraction and retention pressures continue to increase, organisations should consider diverting a higher portion of the kitty toward rewarding critical talent, to drive better business results," said Suri.

Nearly 90 per cent of respondents reported having a variable pay plan in 2002 as compared to 85 per cent respondents in 2001, indicating a rise in prevalence of variable pay plans in India. (Variable pay is a performance-related award that must be re-earned each year and does not permanently increase base salary). Furthermore, the contribution of Variable Pay to Total Cost to Company increased in 2002 across employee groups, except for manual workers, and is projected to increase further in 2003.

Meanwhile, the Hewitt study found that the level of variable pay as a percentage of "total cost to company" was highest for senior/top management level, at 16.5 per cent. This is expected to rise to more than 19 per cent in 2003. The job groups that were ranked most challenging to fill in 2002 were information technology, sales and marketing. © 2003 agencyfaqs!