2020 Deloitte India Workforce and Increment Trends Survey

Overview of Results | March 2020

 India, along with China, has led global economic growth for decades but that growth
has fallen sharply

Share of Global GDP (PPP Adjusted) Real GDP Growth (% y-o-y)

25

10.4%
10.0%
9.8%
20

7.6%

15 6.9% 7.1%

6.1%
5.7%
5.5%

4.8%
10

3.1% 3.2%

2.3% 2.3%
5 1.9%

0
1980 1985 1990 1995 2000 2005 2010 2015 2020 China India USA
China India USA 1980s 1990s 2000s 2010s 2019e

While the slowdown has been broad-based, it has primarily been led by the manufacturing sector on the supply side and both, private
consumption and investment, on the demand side. Real GDP growth has been falling consistently this financial year and there are
downside internal and external risks to real GDP growth forecasts.
© 2020 Deloitte Touche Tohmatsu India LLP 2
Source: IMF, World Economic Outlook
 Organizations have responded by decreasing salary increments

2019 Actual Increment

8.2% 7.3% 6.9%
2020 Projected Increment
7.8% 7.1% 6.8%
Overall India Headcount Weighted Headcount Weighted
Average Increment Average Increment Average Increment
(Excluding IT/ITeS)

8.2% 7.4% 8.9% 8.2% 7.1%

9.4% 8.9%

7.7% 7.1% 9.2% 8.4% 7.2% 7.1%

8.7%

FMCG/FMCD Financial Services IT ITeS Life Sciences Manufacturing Services

The 2020 projected average salary increment in India has dropped by 40 bps compared to actual salary increment in 2019. Adjusted for
company size (measured via headcount), 2020 projected increment decreases to 7.1 percent implying that larger organisations are
being more cautious with respect to increments. And while the 2020 projected increment is lowest in Services, the fall in increment is
the highest in manufacturing reflecting the state of economic activity in the sector.
© 2020 Deloitte Touche Tohmatsu India LLP 3

2019 Actual Increments 2020 Projected Increments

 IT Products is now the only industry cluster offering double digit salary increments

IT/ITeS Financial Services Manufacturing Services

9.5% 7.6% 9.0% 8.9%

10.8% 7.9%

7.8% 8.2% 6.5% 8.3% 8.4%

10.4%
General Chemicals Metals & Hospitality Life Sciences
IT Products
Insurance Mining

6.6% 8.2%
9.5% 7.6%
9.3% 7.6%
7.7%
7.8% 6.0% 7.1%
9.0% 7.7% FMCG/FMCD
ITeS KPO and Life Insurance Energy Engineering
Infra/EPC/Real Estate
Captives Consulting

7.9% 7.2% 7.8% 7.7%

8.0% 7.1% 7.5% 7.0%

Mutual Fund Engineering Retail
ITeS – Third
Party BPO Manufacturing

5.8%
7.4% 6.9% 8.1%
6.2%
7.1% 7.3%
IT Services
7.4% Automotive
Producers Telecom &
Banks Ancillaries

7.3% 7.1% Sub-Industry with highest 2020 increment projection

Sub-Industry with lowest 2020 increment projection

© 2020 Deloitte Touche Tohmatsu India LLP 6.0% 7.0% 4
Automotive
Suppliers 2019 Actual Increments 2020 Projected Increments
NBFC
Individual performance takes centre-stage in determining increment differentiation

Prevalence of different individual increment

differentiation factors (% of Total)

A
90%
B Individual Performance While last year’s performance
Rating continues to be the key determinant
C for salary increments, 1/3rd of the
companies use a forward-looking
D metric like Potential for determining
34% increments
Potential
1 out of every 3 companies is also
differentiating increment by levels of
management. As increments reduce,
33% grade-based differentiation is also
likely to come down
Management
Level
Organizations also focus on fairness of
pay while deciding increment, i.e.,
27% they give a much higher increment to
Current Vs Target employees who are significantly
Compensation underpaid in their current role

© 2020 Deloitte Touche Tohmatsu India LLP 5

 More employees are now being rated as “Average” or “Meets Expectations”

Overall India Population Distribution (2019 vs 2018) 1.7X

(figures in brackets) denote change from 2018 57.9% 1.4X

(+1.0%)
X
23.4%
(-0.7%) 9.1%
(-0.1%)
7.1%
(-0.2%)
2.4%
(+0.1%)

Significantly Exceeds Meets Below Significantly

Exceeds Expectation Expectation Expectation Expectation Below Expectation To manage overall cost budgets,
organizations reward top performers
disproportionately. On an average, top
Performance performers get 1.7 times the pay
1.7 1.4 1.0 0.4 0.1
Multiplier increment given to average performers.

Performance Multiplier- Multiplier for each rating is calculated by dividing the salary increment for each
category byDeloitte
© 2020 Meets Expectation
Touche Tohmatsu Indiacategory
LLP which is considered at to be at 1 or X. Significantly Exceeds Expectation 6
performer will get 1.7 times the increment than average performer
 Performance based differentiation continues to be high in service based industries

Increment
1.83 differentiation
1.77 1.75 1.72 1.69 1.68 between
“Significantly
1.50 Exceeds
Expectations”
and “Meets
Expectations”
Average Performer (1.0)

Increment
0.44 0.44 differentiation
0.38 0.39 between “Below
0.32 0.33
0.26 Expectations”
and “Meets
Expectations”

IT FMCG / FMCD Financial Services Services ITeS Manufacturing Life Sciences

While all industries differentiate increments basis individual performance, service based industries tend to differentiate more than
manufacturing based industries. IT Product companies use the highest range or the most aggressive differentiation curve, i.e. they offer the
least increment if the employee is not meeting expectations and also the highest increment to top performers across industries.

Performance Multiplier- Multiplier for each rating is calculated by dividing the salary increment for each category by Meets Expectation category.
An employee rated “Significantly Exceeds Expectations” will get 1.7 times the increment that the average performer / receives.`
© 2020 Deloitte Touche Tohmatsu India LLP 7
 Top Management employees get 2/3rd of the Increment to Middle Management

Organization Pyramid for Overall India 2020 Projected Increment and Differentiation

Increments Differentiation*

1%
1% Top Management 6.8% 0.66

6%
6% Senior Management 7.2% 0.81

22%
22% Middle Management 7.6% 1.00

71% Junior Management

71% 8.0% 1.16
and Others
While only 33% of the companies differentiate salary increments by levels of management, Top/senior management employees get two-
thirds of the increment given to middle management employees in these companies to optimize cost. We must note that at these levels
compensation is structured more through incentive programs.
© 2020 Deloitte Touche Tohmatsu India LLP 8
*Differentiation- Differentiation for each level is calculated by dividing it by Middle Management Level which is considered at to be at 1.0
While top/senior management employees get a lower increment, not all firms
differentiate increments by management level

Junior Management Difference b/w Top &

Sector Overall Top Management Senior Management Middle Management
and Others Junior Management)

Overall India 7.8% 6.8% 7.2% 7.6% 8.0% 1.2%

IT 9.2% 8.2% 8.7% 9.0% 9.3% 1.1%

ITeS 8.7% 7.9% 8.1% 8.5% 8.7% 0.8%

Life Sciences 8.4% 6.4% 7.0% 7.9% 8.7% 2.2%

FMCG / FMCD 7.7% 6.9% 7.1% 7.5% 7.8% 0.9%

Manufacturing 7.2% 6.0% 6.4% 7.0% 7.4% 1.4%

Financial Services 7.1% 6.3% 6.7% 6.9% 7.2% 0.9%

Services 7.1% 6.0% 6.2% 6.9% 7.2% 1.3%

Across industries, salary increments by levels of management follow a similar trend. Increments are higher at a mid/junior levels compared
to top / senior management. However, not all companies differentiate increments by management level (for those companies we used 1 as
the differentiating factor across all management levels).

© 2020 Deloitte Touche Tohmatsu India LLP 9

Organizations adopting forward looking measures such as Potential to determine
increments
Increment Differentiation for employees classified as High Potential

1.91 1.70 1.64 1.58

1.53

1.9
1.7 1.6 1.7 1.7 1.6 1.6
1.5

Overall India FMCG / FMCD Financial Services IT ITeS Life Sciences Manufacturing Services

Considering performance is a backward looking measure, organizations in India are also using Potential to differentiate increments
between employees. Majority of the companies use a combination of performance and potential, rather than using it as standalone metric.
IT Industry differentiates increments the most for a high potential employee (1.9 times the increment for an average potential employee)

© 2020 Deloitte Touche Tohmatsu India LLP 10

Differentiation- Differentiation has been calculated by dividing increments for high potential with medium/average potential
Still a long way to go before we achieve gender balance at the workforce in India

Overall India
22% 78%
FMCG/FMCD 14% 86% 6

Financial
Services
23% 77% 5

IT 27% 73% 2

ITeS 34% 66% 1

Life Sciences 24% 76% 4

Manufacturing 12% 88% 7

Services 27% 73% 3

IT/ITeS and service based industries in general continue to lead from a gender balance perspective
© 2020 Deloitte Touche Tohmatsu India LLP 11
Ranking
 More than half of the workforce across sectors is a “Millennial”

Baby Boomer Gen X Millennials Gen Z

Overall India 2% 23% 62% 13%

ITeS 1% 8% 70% 21%

IT 1% 16% 66% 17%

Services 4% 24% 56% 16%

Life Sciences 3% 18% 68% 11%

Manufacturing 5% 31% 54% 10%

Financial Services 1% 26% 64% 9%

FMCG/FMCD 4% 28% 63% 5%

Service oriented industries have a higher proportion of younger workforce as compared to the Manufacturing oriented industries.
© 2020 Deloitte Touche Tohmatsu India LLP 12

Baby Boomer : 1944-1964 ; Gen X : 1965-1979 ; Millennials : 1980–1994 : Gen Z : After 1994
Total Attrition goes up with involuntary attrition forming 18% of the total attrition

Overall Attrition
1.3%
15.2% Increase in attrition in 2019
26.8% vis-à-vis 2018
25.5%
0.0% -0.2%
0.1% -0.8%
21.5% 21.5% 21.3% 21.1% -0.3%
19.3% -0.8%
18.8% 18.9% 18.5% 18.2%
17.9%
17.0%
16.2% 0.1%

12.0%12.1%

Overall India Financial Services IT ITeS Services Life Sciences FMCG/FMCD Manufacturing

2018 Total Attrition 2019 Total Attrition

Across Industries attrition has gone down but Financial Services and Manufacturing industries have seen an upward trend in attrition
leading to an increase in overall attrition from last year

© 2020 Deloitte Touche Tohmatsu India LLP 13

Thank You