KPMG predicts a 9.6% increment in compensation across India next year

11 June 2018 3 min. read

According to global professional services firm KPMG, overall compensation levels across India are expected to grow by nearly 10% between 2018 and 2019, representing a mild increase from last year’s rate of increment. This is despite reports emerging earlier this year that compensation hikes are unlikely to take place this year.

In order to properly gauge employee sentiment and the overall environment among the workforce, KPMG in India conducts an Annual Compensation Trends Survey, which obtains responses from employees across a variety of sectors. The firm’s 2018 report is based on responses from just over 270 organisations, operating across 18 sectors.

The current economic scenario is pivotal for the Indian workforce, particularly as an interplay of global and domestic trends is set to disrupt the labour market substantially. A recent report from fellow Big Four accounting and advisory firm EY revealed that the global wave of automation is likely to transform India’s economy, as one in ten jobs is likely to be of an entirely new human-machine hybrid nature in the next five years.

In terms of compensation, professional services firm Aon published a report earlier this year that predicted a slump in salary increments over the next year, stating that the hikes are unlikely to surpass double digits. If this scenario is realised, it would represent the first year in two decades when increments didn’t grow by more than 10%, barring the post financial crisis 2009 fiscal year.

Average increment in compensation

According to KPMG, however, hikes are likely go from fairly low rates to remarkably high rates (even into double digits), depending on the specific sector in question. Overall, the firm predicts a 9.6% average increment in compensation across all sectors, having registered an increase of 0.2% since last year.

However, the figures vary considerably by sector. The professional services sector, for instance, represents the highest rate of increase at 10.7% – up from 10.4% last year – followed closely by the life sciences, pharma and healthcare sector, which will expectedly register an increase of 10.5%, falling from an impressive 10.9% last year.

At the other end of the spectrum, the banking sector is one of two sectors to register the lowest rate of increase at 8.3%, the other being the non-governmental/ non-profit (NGO/NPO) sector. The low rates of increase in the former are not surprising, given the challenges that the sector is currently navigating, particularly with respect to a large repository of non-performing assets. 

Average variable pay across sectors in India

Other factors considered by the report to obtain an overview of the labour market include projections on the average variable pay, average annual voluntary attrition, and the attitudes towards developing performance management systems.

The average projected variable pay across all sectors, as per the report, stands at 15.7%, up from 15.4% last year. The sector most responsible for this increase is the Indian financial services market, which recorded the highest variable pay rate of 20.7%. The NGO/NPO sector is at the bottom of the pile again, with variable pay of 10.6%.

In terms of voluntary attrition, the average rate across all sectors stands at 13.1%, the highest amount being recorded in the retail sector at 18.5%, while the lowest level of voluntary attrition came in the automobile industry, at 6.6%. Meanwhile, 57.3% of the organisations surveyed considered ‘re-inventing performance management systems’ as one of the most important transformations required in HR.