Compensation structures of India Inc will increase by 11.2% on an average according to a study by Ma Foi Randstad. The Salary Survey Guide prediction for this year is lower than 2011 figure of 12.4% average increase.
The survey found that many organisations are considering a double-digit increase primarily because of double-digit inflation that prevailed over much of 2011, which impacted every individual. The double-digit increase is moderated to some extent through a lower variable pay-out. The actual variable compensation realized by employees was observed to be in the range of 70-85% of the targeted variable compensation only. This measure was dominated by the fact that, organizations were hard pressed for overall profitability and margins, leaving lesser scope for paying out variable pay in full.
"With the slow economic growth and inflation in the last two quarters of FY2011 business sentiments have not been very robust. Inflationary pressures in other markets such as the EU and USA have also affected the economy adversely. Hence, organizations are currently being cautious in terms of hiring and expansion. Interestingly, organizations have started giving prominence to planning and distributing the average compensation increase with a view to differentiate between high and low performers compared to the previous years," E Balaji, MD & CEO Ma Foi Randstad said.
Among the sectors the automotive and energy sectors which led growth in 2011 do not seem to share a very healthy 2012 with current business situation. The banking segment which has seen some revival last year, is also playing safe this time, keeping in mind the higher interest rates and inflation.
The variable element in the compensation mix has not changed the course of its upward trend in the year 2012 as well, as organizations are hinting increase in the variable proportion in the overall compensation-mix. The variable compensation is expected to be in the range of 20-25% for senior management with middle and junior management people having a variable compensation of 13-16% and 8-10% respectively.
Based on the survey of over 400 companies between January 2012 and February 2012, the average compensation increase is expected to be in the range of 10.1% to 12.6% for the year 2012. The knowledge intensive industries traditionally known for offering very high average increase earlier too have slowed down, considering increased wage cost and reduction in margins.