It’s not just your salary that didn’t go up

First, the macro picture. According to Hewitt, senior management in firms got salary hikes of around 25 per cent in 1997, and this fell to around 20 the next year … this year, the expected hike is just around 11 per cent. The lowest of the low, the category of manual labour, got a hike of around 20 per cent in 1997, and by this year, their salaries are expected to go up just 10 per cent. Taken across all categories, this year’s average salary hike is expected to be under 10 per cent—last year, the hikes averaged around 13 per cent. Average hikes were 14 per cent the year before (that’s in 2000). What’s interesting about the hikes is that, almost across the board, salary hikes have got compressed in most sectors. Automobiles seem the only exception, where average salaries are projected to rise 9 per cent this year, as against 7.4 last year.

Telecom, last year’s dream profession, is expected to see salary hikes of around 12 per cent this year, as against the hikes of 19 per cent last year. Salary hikes in real estate firms have halved, from around 17 per cent last year to a little over 8 now. Software development (remember Azim Premji?) is also expected to offer lower salary growth — 12 per cent this year, as against last year’s growth of 16 per cent. Says Nishchae Suri, Measurement Head, South & West Asia of Hewitt Associates “seeing the industry trends so far, the actual salary growth of 9.9 per cent projected in December 2001 is coming to be true”. In fact the actual year long growth could be lower than this, he adds. Citing the reasons for this, Suri said that cost pressures are tremendous within the economy, and recovery in global as well as Indian economy is taking longer than estimated.

Another change taking place, is the breaking up of salaries into direct and performance-related segments. While the ‘base’ salary is to compensate an individual for the role played in the organisation, cash allowances are being used to satisfy the specific needs of an individual at various levels. So, while the overall average salary increase is lower, the performers are still well paid.

The share of performance-related pay in the overall salary package has increased by three per cent from 16 per cent in 2001, to 19 per cent this year at the senior/top management level. At the manager level too, share of variable pay has gone up to 15 per cent this year, from 13 per cent last year. At the professional/supervisor and technical level, 12 per cent salary is variable in comparison to 10 per cent last year. However, at clerical and manual level, the share of variable pay is still as low as eight and six per cent. According to Hewitt’s survey for 2001, salary increase is highest at 18.4 per cent for the outstanding performers in all sectors. The above-average employees get a 14.2 per cent hike, while the average performers are given a hike of only 10.5 per cent. The below-averagers have to be satisfied with 3.9 per cent.

A bit of bad news here. Due to the extremely tough economic conditions, companies have raised their performance bars, so yesterday’s above-average may be just about average now, perhaps even below. This year, the percentage of outstanding performers has fallen even further from last year’s 14.4 per cent—it’s down to around 13 per cent. The segment of average performers has also shrunk a few percentage points, from 79 per cent last year. Naturally the below-average performers segment has expanded from 6.6 per cent last year to about 8-9 per cent.

So, if you’re in the top or senior management level, you’ll have to be just that much more careful about performance because salaries at this level are more susceptible to business change. Performance-related pay is much higher at this level and it rapidly becoming more acceptable.