Aon Hewitt, the global human resource consulting and outsourcing business of Aon Corporation (NYSE:AON), has announced the results of its 16th Annual India Salary Increase Survey. Salary increases in India are projected to be 11.9 per cent, marginally lower than the actual increase of 12.6 per cent in 2011. The number mirrors a positive yet cautious outlook as organisations strive to take a balanced view in light of the uncertain economic environment. As compared to other markets, India has outpaced Asia Pacific yet again with the highest salary increase in the region, followed by China and the Philippines, projecting a 9.5 per cent and a 6.9 per cent salary increase in 2012, respectively. With 550 organisations representing 19 primary and 31 sub-sectors, this is the most comprehensive research available in the area of performance and rewards. The data for the survey was collected over November 2011 to January 2012. 

The front runner for this year's salary increase is the Pharmaceutical Industry, with a projection of 13.3 per cent for 2012, riding high on a surging year-on-year growth with a CAGR of 11 per cent. The domestic industry's long-established position as a world leader in the production of high-quality generic medicines is set to reap significant new benefits as the patents on a number of drugs are scheduled to expire over the next few years.

With a CAGR of 15 per cent, Engineering Design/Services projects the second highest salary increase of 13 per cent which is 1.1 per cent higher than the India average. This niche sector is not shy of attracting premium talent for its design and R&D centers and is slated to reach 15-16 Billion USD by 20152.

Infrastructure, Heavy Engineering and Fast Moving Consumer Goods (FMCG) and Fast Moving Consumer Durables (FMCD) sectors continue to get higher salary increases than the country average for the second year in a row. The Auto sector has edged a marginal salary increase over the India average. Auto volumes for January 2012 were largely in line or marginally better than estimates across segments and players. It is expected that the pent-up demand owing to last year's supply constraints will support the growth in 2012-13 as supply eases.

The Power sector, affected extensively by the fuel (coal) price problem, project delays due to challenges in land acquisition, and regulatory and environmental clearances, projects a modest 11.1 per cent salary increase, pulling down the Energy sector (Oil/Gas/Coal/Power) projection to 11.8 per cent. This is a significant change from last year when this sector topped the charts.

The Indian Information Technology (IT) and Outsourcing sectors report a relatively positive outlook on salary increases (11.9 per cent and 11.8 per cent, respectively), despite their continuing concerns with the global economy. The depreciation of the rupee against the dollar, growth in emerging verticals such as retail, healthcare and utility, new business models and organization efficiencies, among others, have been the key contributing factors.

Telecom and Financial Institutions are projecting the lowest salary increases for 2012 at (11 per cent and 10 per cent), plagued by various regulatory hurdles, policy issues and the slowdown in the global economy.

While the projections across all levels of management are lower than 2011, Junior and Middle Management are still expected to get the highest increase for 2012 (12.3 per cent and 12 per cent, respectively). This employee category forms the majority of the employee base. Also, these employee segments constitute the most job opportunities across sectors and locations.

Other Emerging Trends

The salary increases provided to critical talent have consistently been two to three percentage points more than the overall increments in an organisation for three years in a row now. The trend continues for 2012, with a projected increase of 15.1 per cent for this employee group. This trend highlights that India Inc. is increasingly concentrating efforts on identifying top talent and rewarding them accordingly.

Spending on variable pay as part of total compensation has been steadily growing over the past decade. It indicates a shift in overall pay philosophy as employers are tying a greater percentage of employees' pay to individual and overall company performance. Top/senior management see 23 per cent of their total compensation as variable (up from 16 per cent in 2001) and even the lowest-rung entry staff get approximately 13 per cent of their total compensation (up from 10 per cent in 2001) as variable pay.