A host of human resources (HR) experts believe that tough economic conditions globally gave a wake-up call to companies during 2009 to curb their extravagant ways in compensation structures and turned them into more thrifty and performance-conscious firms
'Vulgar' salaries became a sore thumb in 2009 and everyone from chief executive officers (CEOs) to office assistants felt the pinch of the economic downturn, but Indians still managed a worldwide-best average of a 6% hike in their salaries, reports PTI.
With the economy showing strong signs of recovery, the hikes could be fatter in the New Year with industry analysts forecasting pay hikes above 10%.
A host of human resources (HR) experts believe that tough economic conditions globally gave a wake-up call to companies during 2009 to curb their extravagant ways in compensation structures and turned them into more thrifty and performance-conscious firms.
For most of the year, Europe and the US were busy pruning salaries of executives of fallen firms and many companies embraced austerity, while Indians became conscious of high salaries paid to industry captains and perks to those who run the government.
The government asked ministers and departments to cut down on wasteful expenditure, while corporate affairs minister Salman Khurshid asked CEOs to abstain from 'vulgar' salaries—at a time when many had no salary to take home.
"(This year was) one of the more difficult periods in the last 10 years, no doubt. (It) should be seen in the context of the high (of the previous years) and pain of a severe fall," said Ganesh Shermon, partner and country head of people & change practice at KPMG Advisory Services.
Experts at various HR consultancies feel that 2010 would be considerably better in terms of salary hikes and hiring, although firms will continue to tread cautiously.
"For 2010, we forecast average salary hikes of 10.9% across all sectors. However, the appraisals would vary across the sectors," said Gangapriya Chakraverti, Mercer India business leader for information product solutions.
Echoing a similar view, HR consultancy Hewitt Associates said that salary hikes in 2010 are expected to climb quickly and will definitely be in double digits.
"Salaries are likely to rise as companies would face problems of getting the right talent, inflation and building up a pipeline of leaders for the future," said Anandorup Ghose, Hewitt Associates' (India and Middle East) executive for compensation and governance.
Consulting firm Deloitte India's senior director for human capital advisory services, P Thiruvengadam said, "2009 was not seen as a major surprise by employees and HR professionals as the global exposure and the media coverage of the downturn from the middle of 2008 was extensive enough to prepare people for balanced expectations. It was a paradigm shift in the way people accepted the lower levels or no increase."
Owner of leading job portal Naukri.Com, Info Edge's chief operating officer Hitesh Oberoi said, "2009 started on a bad note and hiring had slowed down but things have improved considerably by the end of the year. 2010 is expected to be much better in terms of hiring and salary hikes with firms taking up replacement hiring."
Mr Oberoi added that salary hikes are expected to be in the range of 10%-15% in 2010.
In terms of sectors, IT, Business Process Outsourcing and the export-related segments were impacted the most with layoffs, sharp salary cuts and increment freezes coming their way in 2009.
"In 2010, parts of banking, financial services and insurance (BFSI) sector, consulting and telecom may offer the best prospects for salary hikes," said KPMG's Mr Shermon.
Mercer's Mr Chakraverti said, "Sectors which are likely to fare better in terms of salary hikes in 2010 are the auto and pharma sectors, while IT and BPO which were the worst hit in 2009 are likely to remain under the weather in 2010."
"Sectors like infrastructure and pharma did not suffer a major setback. I anticipate all sectors to return to decent levels of growth, including FMCG. Retail is a sector which one would like to wait and watch," said Deloitte's Mr Thiruvengadam.
Moreover, middle-level executives may walk away with the bulk of salary increments in the 2010 while senior-level executives may continue their austerity drive until the economy is clearly out of the woods.
"The freshers and mid-level executives will clearly see salary hikes in the next year. Though those at the senior rung may not get increments, they will lead the chart in terms of base salaries," said Mr Ghose of Hewitt Associates.
Deloitte said that the overall confidence level or optimism during the last year was one of extreme caution about growth and turnover.
"The signs are that 2010 would be a better year in terms of salary growth. There are skill-set gaps which would require paying the right amounts to get the talent on board," Mr Thiruvengadam said.