Companies gave an average salary hike of 3.6 % in 2020-21 as compared to 8.6% last year, according to a survey.

The 2020 Workforce and Increment Trends survey by Deloitte Touche Tohmatsu India LLP (DTTILLP) provides insights on the impact of COVID-19 on market trends with respect to salary increments, bonus payments, performance management, hiring, and other important aspects of human resource practices.

The findings revealed that only 4 of the 10 surveyed companies in India have given an increment in 2020 and 33 percent companies have decided not to give an increment at all. The remaining organisations are still undecided.

Consequently, for 2020, average increment at 3.6 percent is less than half the increment of 8.6 percent that employees received in 2019. This number is among the lowest in decades. If we only consider organisations that gave an increment, the average increment in 2020 is 7.5 percent. Less than 10 percent companies have given an increment equal to or more than 10 percent in 2020 and the proportion of such companies has dropped drastically since the start of the lockdown in March 2020.

As per the survey, the two most important factors that have affected 2020 increments are the timing of increments and the potential impact of COVID-19.

Organisations that had already decided their increments before the start of the lockdown in March 2020 have given a higher increment compared with others. Moreover, organisations expecting a decline of more than 20 percent in revenue in FY 2020−21 due to COVID-19 have given much lower increments.

Anandorup Ghose, partner at DTTILLP, said, “Pay increases have been slowing in India over the past few years in line with the trajectory of the economy and rising margin pressures. However, with COVID-19 pulling the global economy into a recession, organisations have had no choice but to reduce or halt increments as they evaluate every incremental rupee spent. When revenues are harder to come by, companies usually go into a cost-saving mode.”

The study finds that actual increments across sectors have been lower than what were projected six months ago. No industry witnessed an average double-digit increment in 2020. Increments were the highest in the life sciences sector and the lowest in the manufacturing and services sector (particularly in the real estate, construction, metals and mining, hospitality, retail, and automobiles industries). Even the digital/e-commerce industry, which is known for giving double-digit increments, has struggled to match its past figures. Also, larger organisations (by consolidated revenue) have given a lower increment compared with relatively smaller companies. They also witnessed a bigger drop in increment due to COVID-19.

The survey also asked organisations in India if they plan to give increments in 2021; only 23 percent companies said yes. Given the uncertainty in the business outlook, most companies across sectors have not taken a definitive stance on 2021 increments yet and will decide on the basis of future performance. Increment decisions of 2020 and 2021 are also intertwined. About 38 percent companies that gave an increment in 2020 have decided to give increments in 2021 as well.

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