India to see 10% pay rise in 2023, WTW survey finds

Employee salary budgets in India are expected to increase in 2023, mainly influenced by the persistence of a tight labor market and rising inflation fears. The salary budget planning report from global consulting, brokerage and solutions company WTW (NASDAQ: WTW) found that companies in India are planning an overall median increase of 10% for 2023 (translating into a average salary increase of 9.8%) compared to reality. Increase of 9.5% in 2022.

The report examines a range of employment levels across various industry sectors and is designed to provide companies with guidance on their annual salary forecasts for the coming year.

Figure 1: Projected and actual (median) salary increase for companies in India

According to the report, more than half (58%) of employers in India expected a higher salary increase this year compared to last year, while a quarter of them (24.4%) did not make no changes to the budget. Only 5.4% cut the budget compared to 2022.

Figure 2: Budget for the 2023 salary cycle compared to the 2022 planning cycle

At 10%, salary increases in India continue to be the highest in the APAC region. China is expected to see a 6% increase, with Hong Kong at 4.0% and Singapore at 4% next year.

Figure 3: Q2 2022 median salary increase budget in Asia Pacific

Overall, the most cited reasons why organizations reported higher actual salary budgets for 2022 compared to projections made last year were:

• Concerns about a tighter labor market (68.3%)
• Employee expectations/concerns (44.7%) and
• Expectation of stronger financial results – actual or expected (26.4%)

Economic Outlook, Hiring and Attrition Rates

About 42% of companies in India also forecast a positive revenue outlook for the next 12 months, while only 7.2% forecast a negative outlook.

In addition, the survey reveals that information technology (65.5%), engineering (52.9%), sales (35.4%), technical trades (32.5%) and finance (17.5%) will be the most sought-after position for recruitment in the next 12 months.

Voluntary attrition rates in India continue to be among the highest in the region at 15.1%, second only to Hong Kong.

Commenting on the results, Rajul Mathur, Lead Consultant India, Work and Rewards, WTW said: “In 2022, actual salary increases were above budget and this was largely due to better than expected business performance and the need to retain talent. Despite economic headwinds, higher projections for 2023 reflect cautious business optimism and a still tight labor market.”

Figure 4: Attrition rate in Asia-Pacific

Industry trends in India

The financial services, banking and technology, media and gaming sectors are expected to see the largest wage increases at 10.4%, 10.2% and 10% respectively.

“We have seen significant salary increases across all industries in 2022 and a similar trajectory is expected in 2023. With an increased focus on technology-enabled growth, demand for digital skills is driving higher salaries for tech talent , particularly in the technology, media and gaming, banking, and financial services sectors,” added Mathur.

Figure 5: Trends in budgeted salary increases by sector

Increase in variable payments in 2022

Better-than-expected trade performance also resulted in higher variable payouts in 2022 across all career brackets. Companies are allocating more variable compensation budgets to above-average and high-performing employees.

Figure 6: Budget Allocation of Salary Increases by Performance Rating

“With such a dynamic business environment coupled with a booming talent market, it is essential for organizations in India to develop a compensation strategy that is aligned with macroeconomic realities, industry dynamics, business objectives and customer expectations. We see organizations focusing on long-term incentives, innovative career growth opportunities, flexible working and general well-being to address today’s talent supply challenges,” said Mathur.