India set to see highest salary increase this year

NEW DELHI: It's good time for salaried persons in the country. With economic growth in the range of 8-9%, India is likely to enjoy the highest salary hike in the world, of around 15.2% in 2008 as against 15.1% in the previous year, revealed a survey conducted by global human resource service firm Hewitt Associates on Tuesday.

With double-digit growth in the service sector, there is strong demand for talent in the country, said Sandeep Chaudhary, leader of Hewitt's Rewards Consulting practice. ‘‘Struggle for finding talent to sustain the high growth is growing in the country," he said.

The high economic growth rate has provided employees great career opportunities. Therefore, employers are using compensation as a strategic lever in attracting, retaining and motivating the talent pool.

However, over a period of time, the rate of annual increase in salary might come down and stabilize in a range of 9-10% by 2012 as against the present level of 15%, according to the survey. Choudhary said hike in the entry-level salary in the next four years would lead to stabilization of the annual increase at a lower level.

In 2008, employees in China are likely to get an average hike of 8.7%, in Philippines 8.4%, in Korea 6.7% and in Singapore 5%. Salary hike in India was 15.1% in 2007, 14.4% in 2006, 14.1% in 2005, 13.7% in 2004, 11.5% in 2003 and 9.7% in 2002. As inflation in the last six years, except in 2006 and 2007, remained in the range of 3% to 4%, the double digit salary hike resulted into substantial increase in the purchasing power of Indian employees. In 2006 and 2007, inflation hovered around 6%.

Domestic companies gave higher salary jump at 15.5% in 2007 as against 14.7% by MNCs. In 2008 also, domestic companies will give beter increment at 15.5% as against 14.9% by foreign companies. In 2008, sectors like real estate, energy, retail, telecom, banking/finance and accounting/consulting/legal are likely to receive maximum salary jump. Real estate will witness the maximum hike at 25% in 2008 as against 25.2% in 2007. Telecom is likely to get an average salary hike of 17.6% as against 17.2% in 2007.

With growing competition, attrition has also gone up. According to the suvey, insurance sector has reported the highest attrition rate at 35.2%, followed by IT-enabled services at 28.9% and hospitality and restaurant industry at 27.1%.

The study says use of variable pay as a strategic lever continues to be an important means of retaining talent.