The New Normal: India's Salary Increase Story
India' and 'Digital India' are expected to provide
a great kick-start for companies to setup/expand
business in India. For companies to compete
and succeed in this environment, they
need to ensure a right talent pipeline for current
and sustainable future growth. Campuses are
expected to play a critical role in bridging the
gap between talent demand and supply.
While India Inc. at large, is adopting a cautious
stand on salary increases, the sentiment on the campus
is far more positive. Results show that both campus
compensation pay increases and number of campus hires
have moved northwards. About 38% of the companies
are expected to increase campus compensation pay and
88% of the organizations are expected to either increase
the number of hires in 2016 or keep them constant.
Being aggressive on campus compensation as well as
number of hires, IT/ITeS and services are leading the
campus story.
We further investigated to see if there is any
correlation between GDP, inflation and salaries
(% increase year-on-year) offered at campuses. As
described earlier, India Inc. shows limited correlation
between salary increase, GDP and inflation. However,
on studying campus data (four year trend), we
observed that there is a linkage between improved
GDP and campus hiring trends (numbers and salary
offered). The correlation between inflation and
salary at campuses could not be established.
It is interesting to see that average salary increase
numbers over the last four years is approximately 10.3%
whereas the MBA average increase is approximately 8.4%
and B.Tech average increase is 5.2%. This shows the
campus salary is increasing at a lesser rate as compared
to overall salary increase numbers. We continue to hear
a positive story from organizations on how they are
evaluating campuses as a key talent pool. However, the
offers on campuses are not moving at a rapid pace. There
are a few reasons for this - pay parity across batches is
a non-negotiable for firms. Keeping this in mind, firms
often refrain from hiring batches at a level which is
potentially paid higher than the batch above. In addition,
we have also seen a shift where firms are choosing to
hire from Tier 2 and Tier 3 schools. For these schools the
brand often allows firms to offer less aggressive pay.
Compensation and Pay Mix
The entry of early stage companies/startups has disrupted
the payout at campuses. Not only are these firms armed
with heavy compensation offers - on fixed, variable and
LTI, they bring in the 'Total Rewards' strategy angle as
well. Things like work culture, autonomy, flexibility and
work-life balance are propagated a lot during the
campus talks.
In light of these developments, traditional campus
visiting organizations are re-looking at the compensation
offered at campuses and also the pay mix. Our study
shows that over the years, companies have adopted
smarter ways to design pay packages for campus hires.
Firms are offering minimal year-on-year fixed pay
increases. Instead, the focus is to substantially increase
the one-time payouts such as joining bonus. In addition,
increase in variable pay component to link performance
and pay aggressively is widely observed. Firms are trying
to portray right from the beginning - high performance
will be rewarded.
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