Salaries 2022: The India Story

The past year has been another tough one for most businesses in India, with the pandemic hitting the country hard. The second and third waves of Covid-19 continued to disrupt businesses, economies, and livelihoods, and most of us have had to juggle work, family, and personal time every day throughout the past 12 months. By now, hardworking employees are looking forward to their appraisals and, hopefully, raises in salary. Let’s take a look back over the past year to explore how the organisational landscape in India has changed and what impact this might have on salaries in 2022.

The new normal

Business executives across India are still getting to grips with new ways of working that may or may not mark a permanent shift in Indian workforce culture. Many companies are still working remotely or offering hybrid models that combine remote work with office hours. This can lead to long working hours and burnout, and it’s prompted employers to differentiate themselves by offering additional perks including:

• Wellness programmes
• Flexible working hours
• Mental health resources
• Home office stipends
• Childcare support
• Paid family leave
• Health insurance

Recent data suggest that, at least, employees and employers are somewhat aligned on which perks are most beneficial. Health insurance is the most desired benefit, with 76% of employees wanting it, and it’s also offered by 64% of employers. Paid time off and retirement savings are next most wanted by employees, and these benefits are offered by 47% and 46% of employers respectively. Of course, salaries and pay rises continue to be the greatest motivator for talent.

Are salary raises on the horizon?

Raising salaries is one of the best ways that employers can attract top talent and retain existing talent. The good news for employees across India is that many experts are predicting that few companies in 2022 will be freezing their budgets on salary increases. Salary management requires balancing the company’s budget with its future needs for talent and skills. Some of the factors that managers must consider before committing to salary increases include:

• Organisation revenue
• Growth projections
• Industry and market sentiment
• Roles and niche skills
• Individual performance

The future looks good for many employees. 68% of organisations are projecting increases of 8% in 2022, while 15% of organisations are projecting increases of over 8%. Junior and professional-level employees might be recipients of the highest salary increases at an average of around 10%, while senior-level management may see a rise of 8.3% in 2022, up from 8% last year.

When looking at different sectors, IT might offer the highest salary raises in 2022, followed by life sciences. Employees working at digital and e-commerce companies, in particular, could benefit from an excellent pay rise this year.

How are companies rating performance in 2022?

For many employees, salary rises are still tied to performance. Various performance rating skills including the bell curve and the 5-point rating scale are used, and these are still traditionally favoured by organisations wanting to segment talent. But this year, some companies are saying goodbye to tradition. 5% of companies surveyed are discarding rating scales entirely and instead relying on feedback from managers to judge an employee’s performance and achievements in 2022.

According to last year’s data, salary increments for employees exceeding expectations showed a 12.3% average pay rise, while employees meeting expectations averaged a pay rise of 7.4%. This demonstrates just how much of a difference performance ratings can make to a salary, but it’s not the only factor that affects the likelihood of a raise. In fact, in 2021 most organisations were very conservative about rating employees as ‘exceeding expectations, but in 2022 we’re expecting more employers to rate a higher percentage of the employees more highly as the pandemic appears to wind down.

What challenges do organisations face when implementing the pay rise policy this year?

While the pandemic maybe, hopefully, behind us, its costs are not. In particular, the rising cost of health insurance triggered by Covid-19 has been passed on from insurers to corporates, increasing the cost of providing those all-important additional benefits including healthcare and insurance by around 40% compared to the previous year. It’s important that organisations can strike a balance between rising salary costs and retaining necessary healthcare benefits and other perks in order to ensure that their most talented employees aren’t tempted to look for roles elsewhere in today’s fiercely competitive market.