Deloitte India, Human Capital Advisory Services (HCAS) recently concluded a cross industry Compensation Trends Survey that provided key insights on salary increments and variable pay trends. A total of 142 companies participated in the survey and the key highlights include sectoral analysis on compensation trends.

This year India witnessed conservative increment figures as compared to last year with a marginal drop across all percentiles. The overall median has dropped one percentage point to 12%. India has strong growth fundamentals but faces challenges in the form of a volatile global market coupled with issues of fiscal consolidation and upside risks of inflation expected from fiscal slippage, currency depreciation and commodity shocks.

Throughout the year policymakers struggled to strike a balance between inflation and growth. Domestic growth rate was impacted by tightening of the monetary policy by RBI and geopolitical concerns. Nationally the effect was witnessed across all industries, as a result the spread of variable pay range has shown a considerable decrease as compared to 2011 -12. Across all industries, the variable pay has reduced most for Top Management by 2.5% points and the higher payout is expected to be at 30% as compared to 41% last year

Survey Highlights:

• Overall median salary increase across sectors is 12%
• Manufacturing and Infrastructure & Real Estate sector have reported highest increment figures for 2012 – 2013 at 15%
• Financial Services sector has been most conservative in increment projection for 2012 – 2013 at 10
• Overall Variable Pay (as a % of CTC) across sectors is 16%. The frequency of payout is annual for the majority of companies. However for sales staff, the payout is observed to be monthly or quarterly, depending on organization compensation policy
• Pharmaceutical, Healthcare & Life Sciences faces highest overall attrition at 22%. This is followed by ITeS and Media & Advertising at 16%. Sectors which have registered lowest attrition are Manufacturing and Energy & Resources.
• The overall attrition across industries is 13%. Better Pay and Personal Reasons have been rated as the key reasons for attrition industry-wide
• Hiring and Retaining skilled talent continues to remain a key challenge in the market
• Organizations are also keenly adopting cost optimization measures. ‘Offshoring/Outsourcing’ of activities has been rated highest amongst measures adopted. Interestingly employers are not keen on reducing spend on ‘Recognition Programs' or ‘Training programs’

Sectoral Overview:

Consumer Business & Retail:

• Increments have been conservative at 12%, attributable to the prevalent market sentiment
• The median variable pay in this sector is 18%; competitive to the industry benchmark of 16.2%
• High employee turnover in this sector has made Engaging and Retaining talent a perennial burning priority in this sector

Manufacturing:

• The increments in the Manufacturing Sector are amongst the highest across all sectors for 2012 – 2013. At the median, Annual Increment is at 15%
• Variable Pay median is at 20% and it has increased compared to last year which was 12.5%
• Better Pay has been ranked as the top-most reason for attrition in the manufacturing sector

Infrastructure & Real Estate:

• The increments in the Infrastructure and Real Estate sector are amongst the highest across all sectors for 2012 – 2013. At the median (15%), Annual Increments are considerably higher than the overall cross-sector median
• Variable Pay median for this sector is at 15%
• This sector is concerned with the challenges posed by Talent – especially by Training & Development and Hiring Talent which are the most wide-spread challenges and also the most crucial ranked challenges

Pharmaceuticals, Healthcare & Life Sciences:

• Median annual Increments for this industry are the same as the overall industry median - 12%
• Median Variable Pay % is at 15%
• Retaining critical talent is of great importance in this sector as information is sensitive and organizations would not want to lose employees and vital information to competitors – especially in the current environment in which the sector is operating

Financial Services:

• The median increments in the sector is 10% in 2012-13, 2% points lower than overall industry median of 12%
• There is a marked decrease in the range of variable payout; from 0-120% in 2011-12 to 10-80% in 2012-13
• Skilled talent – hiring, retention and development is critical is a priority for this sector. The sector noticed some strong cost optimization measures like head count reduction, curtailment of employee training and recognition program

Information Technology:

• The increments paid out in the Information Technology Sector have been conservative this year, reflecting the mood of the industry. The industry median for overall Annual Increment is 11%
• The sector median for variable pay is 15.1%
• Hiring of skilled talent has come up as the most critical challenge in this sector as the industry is in a competitive mode and with increase in the number of IT companies in the industry, the fight for best talent is greater than ever

Information Technology Enabled Services:

• The median increments paid out in the Information Technology Enabled Services Sector (12%)
• The industry overall average variable pay % is 13.5%
• Hiring and Retaining employees is what is plaguing the sector since the last few years. Employee engagement is an important area of focus with most organizations investing in programs targeting engagement levels

Media & Advertisement:

• The median increments paid out in the Media & Advertisement sector in 2012-13 is 11%
• The median variable pay for the sector is relatively low at 10.5% of CTC

Energy:

• The median increments in this sector are at 13.8%
• Variable pay % median for the sector is at 13.3%