Pic: IndiaPicture

With around seven per cent increase in 2011, the executive pay level in India Inc has already surpassed European levels and is predicted to surpass the US by 2013, according to a report.

According to a recently released report by Mercer, ‘Global executive pay trends - Asian remuneration eroding West's ability to attract scarce talent through pay premiums', increased pay restraint in Western Europe and North America, combined with economic growth in emerging markets, is pushing pay for executives in Asia beyond levels in the West. Executive pay in Asia has already surpassed European levels and is predicted by Mercer to surpass the US within three years. In 2011, average top-level executive salaries in Asia increased by an average of seven per cent. Contributing factors include continued strong GDP growth, accelerating inflation and crucially, a scarcity of executive talent.

So, what is it that makes executive pay in Asia, especially India, increase at such a rate and surpass big economies like Europe? "I feel that the most significant drivers are the increased demand due to growth and the corresponding scarcity of good senior level talent. It is a simple macro-economic demand and supply equation that is driving up the executive pay levels in India," opines Gaurav Seth, country head, Hays India. According to Ashish Kumar, chief human resources officer, PVR Ltd, "The economic growth in India in the past few years has been phenomenal, due to which there has been an increasing trend in the pay structures. Due to a lack of succession planning in organisations, the retention of high-performing executives has been a challenge."

Dr Hans Kothuis, Mercer's Asia Pacific leader for rewards, Human Capital, reasons, "Historically, executives in western economies have been paid the most but the centre of gravity is moving inexorably East. Asia is an attractive place to work for many executives and better pay is only one factor in attracting many western executives to the region." The report further states that pay in western economies is being restrained by poor economic growth and continued pay scrutiny in light of the current euro-zone, banking and debt crisis. "To date, Asia has been largely unaffected by these issues; hence, executive remuneration hasn't been impacted as much," he adds.

The limited talent pool in this executive employee group and the competition to attract and retain them is driving up pay in some sectors. This may prove unsustainable in the medium term but in the meantime, it is leading to the use of innovative methods of attracting and retaining staff.

It is a positive sign that India is on a growth trajectory and that its executives are getting compensated for their work in such a good manner. However, experts feel that there is also a flipside to this trend and that there are questions being raised about long-term sustainability. The report has cautioned that inflationary drivers behind remuneration in Asia risk creating a bubble, thus fraying the link between pay and performance and distorting company salary structures. So, is there a need for organisations in India Inc to take a relook at the executive remuneration system in India? "Companies in Asia should review their remuneration policies to ensure that they can maintain sustainability and capitalise on rapid changes in technology, trade and financial conditions, as their share of the world economy increases," states Dr Kothuis.

The way the trend is being seen, India will soon be rated amongst the top most countries when it comes to giving fat pay checks to its top level talent, right?

- Yasmin Taj