New Delhi, November 15, 2016 — Salaries in India are projected to rise 10% in 2017, same as the actual increase in 2016, according to the 2016 Salary Budget Planning (Q3) Report released by leading global advisory, broking and solutions company Willis Towers Watson (NASDAQ: WLTW).

When compared to developed and key emerging markets in the region, India’s 2017 projected salary increases are highest. Indonesia at 9%, Sri Lanka at 8.9%, China at 7% and the Philippines at 6.4% are the other countries that make up the top five in this group. Salaries in developed markets such as the US and UK are projected increases in the range of 3%.

Figure 1: Comparing India with developed and key emerging markets

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Salaries were projected to rise 10.8% in 2016, but in reality rose just 10% - the second time below projected increases since 2015. If that pattern continues in 2017, Indian employees could see a single digit salary increase for the first time since 2011. The report also shows that once average inflation for India of 5.7% is taken into account, the projected increase in real terms for 2017 will be 4.3%, down by a fraction from 4.4% in 2016.

Figure 2: Projected and actual salary increase

Year Projected salary increase Actual salary increase
2017 10%
2016 10.8% 10%
2015 10.8% 10.4%
2014 10% 10.6%

The report looks at a range of job grades across various industry sectors. It is designed to provide companies with guidance for their annual salary forecasting for the year ahead. The industries covered include technology, financial services, pharmaceutical and health sciences, chemical, energy and natural resources, media, retail, construction and engineering, transportation and consumer goods.

The Willis Towers Watson report shows that, with tighter salary increase budgets, organisations very discernibly prioritise their top performers. Similar to trends in the Asia Pacific region, the report indicates that in India, 38% of the budget for salary increases goes to the top performers. Another 34% is shared by above average performers while the remaining 28% of the budget goes to average performers.

Sharing his perspective on the findings, Sambhav Rakyan, Data Services Practice leader, Asia Pacific at Willis Towers Watson said, “The data clearly shows a greater emphasis on rewarding high performers rather than across-the-board increases for all workers. Without such differentiation, companies will face pressure in attracting and retaining talent, especially for in-demand areas. Employers have to think beyond inflation-linking and look at more nuanced factors such as affordability, growth expectations, both employee and company performance, and specific talent and skills needs.”

Mr. Rakyan added that, as the available budget shrinks, companies need to be smarter about how they use them to retain talent. “It’s important to prioritise the best performers and also to review how employees are rewarded with other incentives, such as more attractive benefits,” he said.

Sector trends

The pharmaceutical sector continues to project higher salary increases as compared to most other sectors at 11%, while the financial sector will likely remain well below average at 8.5%. The projected salary increase in the high tech sector for 2017 is likely to be the same as the previous year at 10%.

Figure 3: Industry specific salary increase budget

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Willis Towers Watson notes that companies need to rethink whether annual base salary increases are the best way to reward employees. There may be alternatives worth considering to better meet their needs and reflect their contribution.

Highlighting the need for increased transparency in communicating pay, Mr Rakyan said, “Companies need to be transparent about communicating the rationale behind salary increases and performance benchmarking. In our experience, employees appreciate this.”

About the Survey

The 2016 Asia Pacific Salary Budget Planning Report is a bi-annual survey compiled by Willis Towers Watson’s Data Services Practice. The survey, timed to coincide with companies’ compensation planning for 2017, 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 2016. Approximately 4,000 responses were received from companies across 22 markets in Asia Pacific. Click here to purchase the latest Salary Budget Planning Report online.

ABOUT WILLIS TOWERS WATSON

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.