last two financial years, a decline has been witnessed in hiring intentions of companies for the next one year, the report said.
2013 Total Remuneration Survey -- All Industries released on Wednesday has projected an average salary increase of 12% across industries in the next fiscal.
"Overall average salary increase would be around 12% in 2013-14 period," Mercer India's director (information product solutions) Muninder Anand said in New Delhi.
Pharmaceutical sector expects to see the highest pay hike at 12.5%.
"While companies continue to budget for double digit increments, there appears to be a strong sentiment to contain costs leading to companies re-evaluating their budgets," the report said.
The findings are based on a survey of 734 organisations across diverse sectors.
As per the report, organisations would be giving a hike of 4% as promotion increase and 3% as "market adjustment or correction, at median".
However, the survey found that only 72% of companies have plans to hire people in the next financial year whereas the same was at a high of 84% during 2012-13 period.
"Performance based pay and rewards will gain prominence in the appraisal cycle. Hiring will still continue to be on the agenda for most companies in 2013," Anand told reporters.
Meanwhile, the variable bonus payout -- as percentage of annual guaranteed cash salary -- is projected to be around 19.30% for 2012-13 fiscal. During this period, the variable pay is expected to be 25.70% and 23.50% for hi-tech and pharmaceutical sectors, respectively.
In the current business environment, Anand said that companies are increasingly moving employee remuneration away from a fixed-pay approach to one that relies more on variable compensation.
"Corporate sentiment is cautiously positive, though companies are adopting a wait-and-see policy. Our research suggests that companies are not looking at holding back increments in 2012, but are likely to be more selective," Anand said.
Meanwhile, average attrition rate touched 10.1% in the first six months of current financial year, while the rate of retrenchment of staff during the same period stood at 2.2%.
Mercer provides consulting in the areas of talent, health, retirement and investments.