Indian Professionals Feel Shift in Compensation Strategy as Salary Increments Decline

Indian Professionals Feel Shift in Compensation Strategy as Salary Increments Decline

Employers in India are abandoning the traditional practice of across-the-board annual raises to more targeted compensation strategies in which employees are increasingly expected to earn their raises through high performance or professional development, Saumya Bhattacharya reports at the Economic Times:

Last month, when Aon India Consulting announced the findings of its salary increase survey for 2017-18, average increment was estimated to be 9.4% for the year, almost the same as last year. From 2014 to 2018 (projections), average salary increment has declined from 10.4% to 9.4% — with the focus on performance becoming sharper each year. With the ability to learn new skills getting added to the high-performance matrix, the definition of top performers is also set to change.

Top performers, according to the new definition, would get an average salary increase of 15.4%, about 1.9 times that of an average performer, said the survey. … Experts say the phase of a large chunk of employees getting 14-15% increments is over. Ten years ago, you would have 20% of the organisation categorised as high performers. This has shrunk to 7.5% of the population in a company, they add.

The shift away from across-the-board raises has been also seen among US employers over the past few years. Budgets for raises have remained low even as labor markets have tightened, with companies focusing more on merit raises for high performers than on blanket annual increases, and on spot bonuses over raises. Late last year, salary budgets for 2018 indicated that most US employees could expect modest raises at best, while star performers would see bigger raises or bonuses.

Increased business optimism, owing in part to the large corporate tax cut passed by Congress in December, has increased the possibility of workers getting bigger raises than expected, but overall, the trend in rewards is still toward greater performance-based differentiation in pay increases. The latest Aon data from India suggests that this trend is going global as well.