Salaries over the last decade - growing yet greying

It's been a decade since the world (and India) weathered and won over its most recent and impactful economic crisis. Salary increments in India Inc. have always been linked to myriad economic parameters like GDP growth rates, inflation and most importantly the talent demand skill mismatch. However, a trend that has quietly but clearly emerged is the coming of age of India's corporates, when it comes to managing compensation budgets. If personified along the lines of a 10-year life line, the stages of youth, stability and maturity are very clearly visible for India Inc. in this trend line!

It can be argued that while India could afford steep increases in the past few years and remain ahead of the APAC pack, over the last few years it has become amply clear that India cannot operate in isolation. Over the years, with increasing pressure on compensation costs, there is an emerging focus on rationalization of budgets. In addition, the wage base is not so low anymore (aided by almost 15 years of double digit increase). Finally, the demographic dividend that India has to offer (skilled workforce at a competitive price) has become a challenge and is starting to dent the overall story. With critical skills like digital, automation and analytics in high demand, the cost dynamics will play an important role going forward as businesses evolve.

So while the numbers (and their steady decline) are beginning to make sense, should we expect the salary increment story to not look rosy anymore? Perhaps it's more a matter of perspective than anything else, and it's just about taking off the rose tinted glasses and encountering reality in its totality. The focus on performance rightfully is getting sharper year on year. Over the last 10 years, the pay for top performers has increased by 86% more than the average performer which clearly shows that it "Pays to Perform" in India. We expect this differentiation to get even sharper as we enter the next phase of growth, as the salary numbers will continue to reflect the cost consciousness and prudence of companies in the next decade. We are already seeing the best in class employers focus more on non-monetary rewards and other HR practices to attract and retain people, and we believe that more and more companies will use these levers effectively to engage their employees. And that is a clear indication of a more settled, seasoned and sensible India Inc. in the next few years.

The author is Associate Partner at Aon Consulting