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Bumper raises for India Inc, but a tad below last year

A survey says employees in India’s corporate sector are set to witness another world-beating year in salary increases in 2008 with a jump of 14.1 per cent, reports Ruchi Hajela.

business Updated: Jan 07, 2008 22:20 IST
Ruchi Hajela
Ruchi Hajela
Hindustan Times

Employees in India’s corporate sector are set to witness another world-beating year in salary increases in 2008 with a jump of 14.1 per cent, but the raises will be a little less glamorous than last year, says a global survey by human resource consulting firm Mercer, whose findings are endorsed by other companies in the field.

The rise this year will be 9.8 per cent above the inflation rate, signalling that much of a rise in disposable incomes. The only other country on the planet in which employees can expect a two-digit rise this year is Vietnam, where the average increase is expected at 11.9 per cent.

However, India's expected increase is below last year's 15 per cent.

"The overall salary increase is expected to be lower than what it was last year due to factors like rupee appreciation and dollar pressure," Gangapriya Chakraberti, Business Leader, Information Product Solutions, Mercer India told Hindustan Times.

The most attractive segments for the past few years have been the IT and the IT-enabled services sectors, which took a hit last year as the US dollar weakened, eroding profit margins in the export-oriented industry and raising questions over business prospects in the biggest market, the United States. Head-hunting firms are clear that IT salaries are set to decelerate.

"IT and ITeS companies are likely to be hit and wage increments may not be very high across levels of employees," Dr Naresh Malhan, Managing Director, Manpower India told Hindustan Times. Industry experts believe that even at 14.1 per cent, the increase is quite high when compared with the rest of the world.

"I don't think a difference from 15 per cent last year to 14.1 per cent this year is a big difference at all. In my opinion it is almost the same as last year," said Dhirendra Shantilal, Senior Vice President, Asia Pacific, Kelly Services.

Shantilal said Indian pay hikes could go as high as 20 per cent in some cases, with a general across-the-board expectations of a 15 to 20 per cent increase.

According to the Mercer survey, those working in Western European countries like Switzerland and Germany are projected to receive a 2.5 and 2.7 per cent increase whereas those employed in the US and Canada should witness increases of around 3.7 and 3.8 per cent. Even Japan is at the bottom of the pyramid with an expected average increment of 2.5 per cent.

"With a high cost of labour, companies will realise that India is not a cost effective market. I don't see much competition for India in the technology sector. However, in sectors like manufacturing, customers will start considering countries like China that offer much lower costs of labour,” Shantilal said,

He said companies should increasingly court variable pay models to manage costs while trying to retain their best employees.