New Delhi, November 2015 – India is expected to see an overall projected salary increase of 10.8% as per Towers Watson 2015-16 Asia-Pacific Salary Budget Planning Report. Factoring inflation at 6.1%, the net salary increase in 2016 is expected to be marginally higher at 4.7% as against 4.5% last year, when the inflation was at 5.9%.

Sharing his perspective on the findings, Sambhav Rakyan, Data Services practice leader, Asia Pacific at Towers Watson said “What we’re seeing are companies adopting existing practices, such as the percentages of the previous year as a benchmark for the coming year. Companies need to be smart about how they use limited salary budgets, because high volatility and talent crunches are causing frequent shifts to pay. Determining current pay rates for jobs in a highly competitive talent market is akin to shooting at a moving target. What companies pay for a job today might be different tomorrow, and if managers don’t keep an eye on the market, they could risk losing valuable talent to the competition.”

Indian Employers less Upbeat on Business Outlook

The projected higher overall salary increases are despite the fact that employers in the third quarter are less upbeat on the business outlook for India than they were in the first quarter. Those with a positive outlook shrank to 41% from 58%.

“Employers may be bearish in thinking there is a weak business outlook given the current poor market data, but the case is the opposite for employees, who hold bullish expectations for salary rises. This mismatch in belief tells us there isn’t always a positive correlation between economic sentiment and staff expectations. Employers will need to carefully and proactively manage employees’ longer term expectations, if they are to achieve a harmonious and content workforce.” said Mr. Rakyan.

The third quarter survey results show a similar trend to those of the first quarter in terms of higher increases going to top performers. The latest research shows that across employee levels, the “top performers” get higher increases averaging 12.5%, while “above average” and “average” performers get 11% and 9.7% raises, respectively. A similar trend is evident in the three core industries in the survey: financial services, technology and healthcare/pharmaceutical.

“To reward employees based on their performance offers them a great incentive and also reflects growing market maturity. It also shows the rising competition for talent. We can expect greater segmentation and personalised delivery for compensation, with a corresponding increase in different forms of reward options, especially for high performers,” added Mr. Rakyan. 

He also advised employers to have a good evaluation system and a transparent communication plan, “Organisations need to have open lines of communication about pay, and take an active role in helping employees understand the rationale behind pay decisions,” he said.  

Sector trends in India  

The high tech sector in India is expected to see a healthy increase of 0.70% in salary at 10.7 % (as compared to 10% last year)  

“Salary increases in the high-tech sector over the medium to long term will be driven by the advent of new technologies such as wearable devices, cloud computing and enterprise application software’s that are expected to keep growing. This in turn combined with the government’s thrust towards digitisation through its ‘Digital India’ initiative would drive the demand for talent, compensation and performance liked pay in the high-tech sector.” said Mr. Rakyan.

Sector Actual Salary Increase - 2015 Projected Salary Increase - 2016 Year on year increase
High Tech 10.00% 10.70% 0.70%
Energy 11.00% 11.50% 0.50%
Pharmaceutical & Health Sciences 10.40% 10.90% 0.50%
Financial Services 10.00% 10.40% 0.40%

The energy sector has the highest actual projected salary increase in 2016 at 11.5%. “India’s energy sector is seeing some big changes with the Government’s push towards the sector, especially in the renewable energy space and these may be key indicators driving salary increases,” said Mr. Rakyan.  

The financial services sector in India has traditionally seen higher comparative pay increases, but at a modest 10.4%, the projected salary increase for 2016 is not as high as other sectors.  

ASIA PACIFIC

The APAC scenario

Salary budgets in the APAC region are set to rise 6.8% in 2016, slightly higher than 6.6% in 2015. But once inflation is factored in, average increases will be 3.4% next year, compared to 4.1% this year. In 17 of the 22 Asia Pacific markets covered by the survey, employees will go home with less money next year. Average inflation in 2016 is forecast to grow at 3.4%, up from 2.5% in 2015(*1).

Salary Raises Out of Synch with Inflation in the APAC regions

In East and Southeast Asia, the biggest overall increases for 2016 will be in Indonesia (9.4%), Vietnam (10.4%) and mainland China (8%) all higher than last year. However, once inflation is taken into account, real increases in these countries drop to 3.9%, 5.6% and 5.8% respectively. At the other end of the scale is Japan, where the overall increase is expected to be 2.4% or 0.9% in real terms.

About the Survey

The 2015 Asia Pacific Salary Budget Planning Report is a bi-annual survey compiled by Towers Watson’s Data Services Practice (TWDS). The survey, timed to coincide with companies’ compensation planning for 2016, looks at a range of industry sectors and job grades from factory shop floor to executive suite, and focuses on salary movement and review practices.

The survey was conducted in July 2015. Approximately 2,000 responses were received from companies across 22 markets countries in Asia Pacific. Click here to purchase the latest Salary Budget Planning Report online.


(*1) Macroeconomic data source: Economist Intelligence Unit (EIU) – Figures as at August 2015