increment: Average India increment expected to increase from 8% in 2021 to 9.1% in 2022: Deloitte survey

Here’s what India Inc employees can look forward to in the 2022 appraisals: an average increment of 9.1%, up from 8% in 2021, 4.4% in 2020 and 8.6% in pre-Covid 2019.

These are the findings of the 2022 Workforce and Increments Trends Survey by Deloitte Touche Tohmatsu India, launched in December 2021 covering 450 organisations in seven sectors and 27 subsectors.

The economic impact of the third wave of the pandemic has been the least compared to the previous two, resulting in better increment projections for 2022 across all industries. While growth is witnessed across, the rate of increase has been different due to demand-supply dynamics of the talent market.

Information technology is the only sector expected to record double-digit increments at 10.5%, while life sciences comes next with projected increments of 9.4%, according to sectoral data shared exclusively with ET.

IT-enabled services, consumer products and manufacturing are expected to give hikes of 9.1% and financial services 8.7%. The services sector is projected to give the lowest average hike of 7.9%.

“Increments are currently being driven predominantly by the local labour market conditions rather than business performance,” said Anubhav Gupta, partner at Deloitte India.

While all sectors are expected to give a higher increment in 2022, IT and services are expected to witness the highest change from the previous increment cycle.

In case of the former, which paid 9.1% in 2021 and is projected to give 10.5% this year, this is due to the high demand for IT skills across industries since the hiring acceleration of 2021.

For services (6.6% in 2021), while the sector has not surpassed 2020 or 2019 increment pay-outs by a great margin, with growing consumer confidence in retail and hospitality services, these sub-sectors began recovering gradually and increments are looking much better than in 2021.

Almost all organisations are planning to give increments in 2022, Phase-1 of the survey has found, compared with 92% in 2021 and only 60% in 2020. About 34% of the organisations are planning to give double-digit average increments, compared with 20% in 2021 and 12% in 2020. Employees at junior management are, on an average, expected to receive a double-digit increment in 2022.

“In 2020, the pandemic pulled the economy in a recession and lower increments, pay cuts and hiring freezes were common. In 2021, increments were higher, pay cuts were reversed, and Covid-19-specific benefits were introduced. However, in 2022, in line with the pickup in activity, as well as hiring and attrition, companies have surpassed pre-pandemic levels of increments, with a sharp focus on retention of talent through rewards,” said Anandorup Ghose, also a partner at Deloitte India.

Pan India, the average attrition has increased from 15.8% in 2020 to 19.7% in 2021, with voluntary attrition going up by more than 5% between 2020 and 2021.

“Traditionally there are long-term incentives in organisations focused on retention. But given the great resignation wave, companies will now spend a little more on onetime interventions, retention bonuses for high performers, high potentials, succession pipeline. If the salary increase budget is 9.1%, around 2-2.5% will go towards these specific interventions,” said Gupta.

As much as 92% organisations are expected to use individual performance to differentiate increments across employees, with the top performers expected to get 1.7 times the increment given to average performers.