Several potential factors could account for this trend. Firstly, India’s status as a youthful and expanding economy, coupled with its substantial workforce, engenders intense competition for talent, thereby propelling salary increments. Secondly, a significant number of Indian firms operate within the technology and other fast-growing sectors, which tend to offer more substantial compensation packages. Lastly, the Indian government has implemented measures to foster business growth and job creation, contributing to economic advancement and a conducive backdrop for wage growth.

Explaining increased budgets for salary

The report pointed out that companies are revising their salary increase budgets for the coming year due to two key concerns: Tightening labour markets and escalating inflation.

In the context of tightening labour markets, companies find themselves engaged in fierce competition to both attract and retain top talent. This heightened competition is resulting in increased salary offers, as companies are becoming more willing to pay premium wages to secure the services of exceptional employees.

Concurrently, the upward trajectory of inflation is exerting additional strain on salary budgets. As the cost of living rises, employees naturally expect their salaries to keep pace. Consequently, employees are expressing higher salary expectations, compelling companies to respond by increasing salaries to a greater extent than they might have otherwise.

The report revealed that over half of the companies have expanded their salary budgets for the current year when compared to the figures from 2022, with a quarter of them surpassing the budget projections they had set in December 2022. This indicates a growing willingness among companies to provide more substantial salary hikes, even in the midst of economic uncertainty.

Technology, financial services and retail sectors to pay more

Anticipated for 2024, the technology, media, gaming, financial services, and retail sectors are poised for the most substantial salary increases at approximately 10 per cent. Several factors contribute to this projection:

High talent demand: These industries are experiencing rapid growth, and as a result, they require a skilled workforce. The heightened demand for talent is a key driver behind the salary uptick.

Competitive environment: Companies within these sectors are engaged in intense competition to both attract and retain top-tier talent, intensifying the upward pressure on salaries.

Emphasis on innovation: These sectors heavily rely on innovation to remain competitive. To stay ahead in the innovation race, companies in these fields often invest in their employees, which often translates into higher salaries.

Additionally, the marginally higher salary increases projected by companies in the BFSI, retail, and captives sectors for 2024 signify positive prospects. This indicates confidence in their future growth and underscores their commitment to investing in their workforce.

“Companies across industries are still closely monitoring their cost structures,” said Rajul Mathur, Consulting Leader – Work and Rewards, WTW India.

Explaining survey responses 

The WTW Salary Budget Planning Report stands as an expansive and all-encompassing survey, comprising over 32,000 responses from companies spanning 150 countries. This scale imparts significant statistical validity to the survey results, allowing for broad, overarching conclusions regarding salary increase trends.

Notably, the substantial participation of 708 Indian companies in this survey holds significance. It signals a keen awareness among Indian companies regarding the vital nature of salary budget planning, underlining their dedication to offering competitive compensation packages to their workforce.

Furthermore, the survey’s revelation that Indian companies anticipate a 9.8 per cent salary increase in 2024, closely aligned with the 10 per cent increase observed in 2023, carries positive implications for Indian employees. This indicates that Indian firms are actively investing in their workforce, demonstrating their commitment to providing competitive salaries and financial well-being to their employees.

In 2024, India is anticipated to lead Asia Pacific (APAC) with the highest projected salary increases, standing at 9.8 per cent. Following closely are Vietnam at eight per cent, China at six per cent, the Philippines at 5.7 per cent, and Thailand at five per cent.

This development bodes well for Indian employees, reflecting a corporate commitment to employee appreciation and investment in talent. Simultaneously, it serves as a positive indicator for the Indian economy, underlining business confidence in future growth prospects.

Additionally, the revelation that nearly 28 per cent of surveyed companies plan to engage in recruitment within the next 12 months carries encouraging implications for Indian workers. It signals a forthcoming strong demand for talent, providing promising opportunities in the coming year.

The prominence of IT, engineering, and sales positions atop the list comes as no surprise. These sectors are characterized by rapid growth, perpetually driving the demand for highly skilled professionals.

It’s worth noting the heightened demand for technical skills trade roles, which signifies an increasing need for proficient tradespeople in areas such as plumbing, carpentry, and electrical work. Furthermore, the inclusion of finance, marketing, and HR positions in the mix augurs well for the broader economy. This indicates that businesses are actively investing in expansion and workforce growth.

Positive outlook in the job market

In summary, the job market outlook for the upcoming 12 months appears optimistic. Diverse sectors are displaying a robust appetite for talent, offering favourable prospects for job seekers in their quest for employment opportunities.

“Sectors like manufacturing, pharmaceuticals, media, gaming, and global captive centres are expanding and this is evident from their hiring plans and salary allocations for 2024,” said Mathur, adding, “Despite a slowdown in IT recruitment, mid-sized companies, product and platform firms, and the GCCs of financial services companies are expected to continue to hire.”

In 2023, the voluntary attrition rate in India decreased to 14.6 per cent from 15.3 per cent in 2022, indicating an uptick in job satisfaction among Indian employees and a reduced inclination to leave their positions voluntarily.

This trend can be attributed to a couple of potential factors. Firstly, Indian companies may be intensifying their investments in employees, offering more avenues for growth and development. Such measures can boost employee contentment and consequently lower turnover rates. Secondly, India’s briskly expanding economy might be generating a greater number of job opportunities, enhancing job security, and thereby mitigating attrition.

Although the voluntary attrition rate in India remains relatively high, there is still room for improvement. Companies in India should persist in their efforts to invest in their workforce and foster a positive work environment.

“Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!

Updated: 01 Nov 2023, 05:58 PM IST