Aon’s India Salary

Increase Trends Survey

October 2020-21

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Aon’s Salary Increase Trends Survey
The largest, longest running, most comprehensive study on performance & rewards trends

1,050 20+
25th Organizations Industries
Year running covered
covered

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Aon’s Salary Increase Trends Survey
The largest, longest running, most comprehensive study on performance & rewards trends

Consumer
Auto Banking Cement Chemicals Early stage
Durables

1,050
organizations
Engineering Engineering Financial
E-commerce Energy across sectors FMCG
Services Manufacturing Institutions

Hospitality & Transport &

Hi-Tech/ IT Insurance ITES Media
Restaurants Logistics

Metals & Pharma & Professional Real Estate &

Retail Telecom
Mining Lifesciences Services Infra

Human Capital Solutions Coverage of 20+ sectors and 30+ sub-sectors

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 Salary Increments
Light at the end of the tunnel?

Above normal rainfall

INR 1.7 Lakh Cr to PMGKY & led to ~7% additional
INR 20.97 Lakh Cr to Atma farmland being NPAs
Nirbhar Abhiyan cultivated
COVID-19
Monsoons second
Geopolitics wave
In September, (~4%
Stimuli Increased higher than last year)
GST
Festive collections
PMI rose to 56.8
season
(highest in 8 years)
& second straight PMI
monthly rise

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Glimpse of Salary Increments globally
Salary Increase numbers and their correlation with GDP
3.0 2.8 3.0
1.5 -9.8 5.9 Russia 6.4 4.8 5.5
United Kingdom 1.3 -4.1 2.8

2.4 2.3 2.6

0.7 -5.3 2.3
Germany Japan
2.9 2.6 2.9
U.S.A 0.6 -6.0 4.2 China
India 6.2 5.1 5.5
3.1 3.3 3.5
9.3 6.1 7.3
2.2 -4.3 3.1 6.1 1.9 8.2
4.2 -10.3 8.8

Brazil Singapore
5.3 4.1 4.5 3.8 3.4 3.5
1.1 -5.8 2.8 0.7 -6.0 5.0

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2019(A) 2020(A) 2021(P) GDP 2019 GDP 2020 GDP 2021(P)
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Source: IMF: World Economic Outlook, October 2020 Figures in %
Glimpse of Salary Increments globally
Salary Increases for the years 2018 - 2021

2.8 2.9 3.0 2.8 3.0 Russia 7.3 6.7 6.4 4.8 5.5
United Kingdom

2.3 2.4 2.4 2.3 2.6

Japan
Germany
2.7 2.7 2.9 2.6 2.9
U.S.A China
India
2.9 3.0 3.1 3.3 3.5 6.4 6.3 6.2 5.1 5.5
9.3 9.5 9.3 6.1 7.3

Brazil Singapore
7.0 5.7 5.3 4.1 4.5 3.8 3.7 3.8 3.4 3.5

2017 2018 2019 2020 2021(P)

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Source: IMF: World Economic Outlook, October 2020 Figures in %
Salary increase trend for India Inc.
Absolute increment numbers over the two crisis
15.1 High double digit Low double digit Single digits
14.5
13.3 12.6
12.5
11.7
10.7 10.4 10.4
10.2 10.2
10.5

9.5 9.3
8.5 9.3
7.3

6.5
6.6
6.1
4.5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (P)

Aon insights: Post the 2009 Crisis, salary increase numbers came down to the lower two digits to higher
single digits and it is expected that the years post the 2020 health crisis will bring India in line with the
developed nations with respect to salary increases

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Source: Aon Salary Increase Survey
Lower inflation leading to higher real increments
Real inflation-adjusted increment numbers
8.9

5.7 5.7 6.1

5.5
4.6 4.5
4.2
3.1 3.5

1.2 1.2
0.7 0.8

-5.7

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (P)

Aon insights: With lower inflation rates compared to the initial part of the decade, even after relatively lower
salary increments, the real increment is positive

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Source: Aon Salary Increase Survey, Inflation data from IMF projections
Aon’s Salary Increase Trends Survey
Key Highlights

87% companies plan to give salary increases in 2021

Forecast as compared to 71% in 2020

2020 (Actual): 6.1%

Salary Increase 2021 (Projected): 7.3%

Sectors with highest increases:

Hi Tech / IT, Pharma & Life Sciences, ITeS
Sectoral view
Sectors with lowest increases:
2021 (Projected) Hospitality, Real Estate & Engineering Services

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Source: Aon Salary Increase Survey *Salary increment numbers are including 0’s
Increment cycles and increments for 2020
A case of timing?

Increment cycle ending period

8.0% 7.4% 7.3%

7.0% 6.2%
6.0% 5.7%

5.0% 4.2%
4.0%
3.0%
2.0%
1.0%
0.0%

Jan to March April to May June to August September to October 2021 (P)

Aon insights: Organizations with increment cycles ending in Jan to Dec were most insulated from the full-
blown impact of COVID and gave the highest increments. With lockdowns and restrictions, the numbers went
down further, but with restrictions easing, the impact of timing is getting further restricted.

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Source: Aon Salary Increase Survey *Salary increment numbers are including 0’s
2020 vs 2021 Comparison
Actual Increments vs. Projected Increments

Percentage of companies

Projected Higher 26.7%

No Change 39.8%

Projected Lower 33.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

Aon insights: 2/3rd of the companies either aim to provide similar or higher increments in 2021 compared to
the increments offered in 2020

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Source: Aon Salary Increase Survey *Salary increment numbers are including 0’s
 Salary Increase Trends Across 2020 and 2021
2020 (Actual) Sharp reduction in number of 2021 (Projected)
companies going for a zero
increments

29% 32%
28% 29%
9% 18% 16% 14% 16.6%
15%
10%

0% 0 - 5% 5 - 8% 8 - 10% 10%+ 0% 0 - 5% 5 - 8% 8 -10% 10%+

Average: 6.1% Average: 7.3%

Aon insights: ~61% of the organizations are projecting to offer increases between 5 to 10%, compared to
the ~46% of organizations in 2020 who have given between 5 to 10% increase

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Business impact of the COVID – 19 crisis
Correlation between increments and business performance

Business Impact Salary Increments

9.0% 8.4%
7.9%
8.0% 7.2% 6.8% 6.9%
22.4% 7.0%
6.0%
4.8%
5.0%
52.4% 4.0%
3.0%
25.2% 2.0%
1.0%
0.0%
Improvement No Impact Decline
Improvement No Impact Decline 2020 (A) 2021 (P)

Aon insights: Strong correlation seen between business performance and increments. Organizations have
used business performance to determine 2020 (A) increments and aim to maintain market competitiveness vs.
their peers for 2021 (P) increments.

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Industry wise increment numbers ranked basis 2021 (P)
Represented as 2020 (Actuals) | 2021 (Projections)
Above 8% Between 6 to 8% Less than 6%
Early Stage Consumer Durables Energy
8.1% | 8.8% 7.1% | 7.1% 4.9% | 5.5%
Hi Tech / IT Engineering/ Manuf. Telecom
7.8% | 8.7% 4.4% | 7.5% 5.2% | 5.5%
Pharma & Lifesciences Metals & Mining Entertainment & Media
8.3% | 8.7% 3.7% | 7.5% 6% | 5.5%
ITES Cement Financial Institutions
7.2% | 8.6% 4.1% | 7.3% 4.8% | 5.3%
E-commerce Transport & Logistics Engineering services
7.1% | 8.4% 3.7% | 7.5% 4.6% | 4.9%
Chemicals Auto Real Estate/ Infra
7.4% | 8.3% 4.1% | 6.8% 1.5% | 4.2%
FMCG Retail Hospitality/ Restaurants
7.4% | 8.2% 1.6% | 6.3% 1.1% | 2.9%

Aon insights: High variances across India Inc for both 2020 and 2021 with differences between the highest and lowest
values higher than the previous 4-5 years
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Source: Aon Salary Increase Survey *Salary increment numbers are including 0’s
Salary Increase by Levels of Management

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Salary Increases by Levels of Management: Mind the Gap
Continued gap between senior and junior management?
Salary Increases

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (P)

Top & Senior Management Middle Management Junior Manager/Supervisor/Professional

Levels of Management 2010 2019 2020 (A) 2021 (P)

Top & Senior Management 11.1 8.1 5.3 6.3

Middle Management 12.0 9.4 5.9 7.2

Junior Management 12.4 10 6.4 7.6

Aon insights: The gap across the levels of management with respect to salary increments has continued
across 2021 (P) with a similar % differential across the levels over the last 3 years

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Source: Aon Salary Increase Survey *Salary increment numbers are including 0’s
Performance Bell curve

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Performance Bell Curve for 2020
Increments and performance ratings

53.5%

23% 9%
9.8% 4.6%
Far exceeded expectations Often exceeded Met expectations Often did not meet Did not meet
expectations expectations expectations

1.7X 1.32X X

10.1%
8.0%
6.1%
2.4%
0.0%
Far exceeded expectations Often exceeded Met expectations Often did not meet Did not meet expectations
expectations expectations

Aon insights: Since disruptions happened only in the last month/ months, drastic impact has not been seen across the
performance bell curve for 2020
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Source: Aon Salary Increase Survey *Salary increment numbers are including 0’s
Pay for Performance
It pays to be a high performer

Employee Performance Differential Performance Pay Differential

Horizon 3 (2005 -2010) 10.1 29.4 52.5 8.1 1.3X

Horizon 2 (2011 -2015) 9.0 24.7 54.4 11.9 1.6X
Horizon 1 (2016 -2019) 7.4 23.5 55.3 13.8 1.7X
2020 (A) 9.8 23 53.6 13.6 1.7X

Far Exceeding Expectations Exceeded Expectations Met Expectations Did not meet expectations

Aon insights: Even with constrained budgets and a challenging business environment, India Inc. continued
the journey towards performance linked differentiation

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Source: Aon Salary Increase Survey *Salary increment numbers are including 0’s
Variable Pay

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Business impact of the COVID – 19 crisis
Correlation between 2020 bonus payouts and business performance

Business Impact 2020 Bonus Payouts basis Business Impact

Bonus Payout Treatment Decline No Impact Improvement

22.4%
We have deferred payout 16% 2% 6%

52.4% We have frozen bonus payouts 7% 1% 5%

25.2% We have already paid bonus as

63% 77% 67%
per actual business performance

We have already paid bonus but

used discretion in deciding the 2% 6% 6%
payout
Improvement No Impact Decline
Yet to decide / Discretionary /
Different treatment across levels 12% 14% 16%
of management

Aon insights: Since bonus payouts were linked to the performance of 2020, majority of the organizations paid
out bonuses as per actuals, owing to no/ disruption in the last few months of 2020 only.

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Industry wise Bonus payout status
Correlation between 2020 bonus payouts across industry segments

Bonus Payout Treatment ITes / Tech BFSI Manufacturing* Services

We have deferred payout 8% 13% 10% 15%

We have frozen bonus payouts 4% 1% 4% 8%

We have already paid bonus as per actual

65% 67% 73% 60%
business performance

We have already paid bonus but used

4% 6% 5% 3%
discretion in deciding the payout

Yet to decide / Discretionary / Different

18% 14% 8% 14%
treatment across levels of management

Aon insights: Irrespective of the sector, majority of organizations have rolled out bonuses as per actual
business performance

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*Manufacturing Industry includes Consumer, Pharma & Lifesciences
Variable Pay Trends
Average variable payouts as a % the fixed pay
Highest variable payouts for 2020

Financial Institutions Consumer Durables

19% | 16% 13% | 13%
India
FMCG 16.1% 12.0% ITES
20% | 14% 12% | 12%

Hi Tech / IT Metals & Mining

16% | 14% Manufacturing 17% | 12%

Pharma & Lifesciences

16.2% 11.2%
E-commerce
15% | 14% 14% | 11%

Chemicals Services Energy

17% | 13% 16% | 11%
16.1% 12.5%
Aon insights: Drop in variable payouts across all sectors for 2020 vs. 2019. With sectors projecting higher increments,
showing the narrowest drop across increments
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2019 2020
Variable Pay across levels of management
Average variable payouts as a % the fixed pay

30.0%
24.5%
25.0% 23.4%

19.6%
20.0% 17.0%
16.5%
15.1%
15.0% 11.4%
10.8% 11.0%
10.0%

5.0%

0.0%
Top/Senior Management Middle Management Junior Management

2018 2019 2020

Aon insights: Similar variable pay levels across junior management over the past 3 years. Senior Management has
shown the highest level of variance across variable pay numbers.
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 Reward Challenges
Top challenges in managing rewards between 2019 and 2020

Strategic Effective Maintaining Pay for

differentiation for key communication of market performance &
talent rewards competitiveness productivity

2 1 3 2 1 3 5 4
2019 2020 2019 2020 2019 2020 2019 2020

Aon insights: Increased focus on internal differentiation and effective communication of rewards, as 2020 has been
primarily an inward - looking exercise for organizations.
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Key Salary Increase Trends
How COVID – 19 dictated trends

Increment timings Strong correlation Increasing cross Baseline for Dynamic increment
impacted nos. with Organizational industry disparity compensation is numbers
performance moving

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Conclusion
The future of rewards

Increased Investment Investment into Future of work impact

into Key talent Benefits on Rewards Design

G G

G G G

Location based pay

Pay for Skills
differentials

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Thank you!

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