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Entering the era of the ‘New Normal’ in salary increases in India
Aon Hewitt’s annual Salary Increase Survey highlights five-year status quo in general compensation trends reflecting higher focus on merit increases

NEW DELHI (Feb. 16 2016) – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), today announced the 20th edition of its annual Salary Increase Survey in India. The study, the largest of its kind in India, analysed data across 700 companies. The results reflect a pragmatic approach adopted by corporate India towards pay increases. Anandorup Ghose, Partner at Aon Hewitt India, commented: “With this year’s numbers we are seeing a confirmation of our view that Indian companies are taking very clear steps to arrest the steady increase in compensation budgets. The lower inflation rates in the economy has also helped companies in deciding on the reduced salary increases without creating too much of a disruption in the lives of employees.”

Companies across industries are continuing to take a cautious stance and are not going for aggressive pay increases. In many cases the industries have taken a marginal dip in their overall budgets as compared to 2015 actual spends. Sectors such as Life Sciences, Media, and Consumer Products are projecting a higher increase than the market average. These industries have also consistently led the salary increase numbers since 2012. The ‘Early stage companies/Start Ups’ stand out despite being in the pre-profit stage for over three years and continue to have an aggressive stand on pay. At 15.6% salary increase projected for 2016, they feature as number one, with the closest second being Life Sciences at 11.6%.

S.No

Industry

Proj Salary Increase (2016)

S.No

Industry

Proj Salary Increase (2016)

1

E-commerce  / Early Stage

15.6

11

Engineering Services

10.2

2

Life Sciences

11.6

12

Energy (Oil/Gas/Coal/Power)

9.9

3

Media - Electronic/Print

11.2

13

Hospitality & QSR

9.9

4

Hi Tech/Information Technology

10.8

14

RE & Infrastructure

9.8

5

Consumer Products

10.8

15

Cement

9.8

6

Automotive/Vehicle Manufacturing

10.7

16

Transportation/ Logistics/ Shipping Services

9.7

7

Retail

10.7

17

Telecommunications Services

9.7

8

Chemicals

10.7

18

Metals

9.3

9

ITeS

10.3

19

Financial Institutions

8.8

10

Engineering/Manufacturing

10.3

 

Increasing Focus on Talent and Merit

Over the last few years, while employee expectations have gone up, Aon Hewitt’s data shows that companies are managing these higher expectations carefully and are not getting swayed by it. The focus on performance differentiation is far higher with a larger proportion of budgets being allocated to higher performers.

Investing in key talent emerged as a major trend. Key talent would mean high potential and hot skills apart from high performers. The payout gap between an average performer and key skills is growing year on year. At 63%, this is the highest differentiation India Inc. has observed.

Additionally, in the last five years, the percentage of employees with top performance rating has dropped by close to 30%, implying that organisations are not hesitating to differentiate sharply on the basis of performance and are allocating the share of the total increase budget accordingly. India places 8.2% of its overall population at top rated. This number has significantly dropped in the last five years.

Anandorup Ghose commented: “At an average pay increase budget of 10.3% across India, HR managers will be pushed to ensure they are being more innovative and thoughtful in how they reward their top performers while ensuring they are able to retain and motivate the rest of the organization as well.”

Attrition rate at its lowest for five years

The attrition rate in India is dropping. At 16.3%, it is the lowest that corporate India has observed since the 2009 financial crisis. While attrition was controlled at a broader level, key talent attrition increased from 5.9% in 2014 to 7.3% in 2015. Increasingly organisations are developing separate retention plans and policies for their top talent. While Rewards continues as a retention tool to ring fence top talent, programs around leadership opportunities and coaching, overseas assignments, fast track programs for hi – potentials are fast gaining prominence.

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About Aon

Aon plc (NYSE:AON) is a leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captive’s manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global partnership with Manchester United

For more information on Aon Hewitt, please visit http://aonhewitt.co.in/

Media Contact: 
Sushil Bhasin
+91 9810068426
sushil.bhasin@aonhewitt.com



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