Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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If you’re taking home (so to speak) a smaller pay packet each month, you can stop wondering if you’re alone as a recent Deloitte Survey confirms this erosion in value. The 2020 Workforce and Increments Trends Survey by Deloitte Touche Tohmatsu India LLP (DTTILLP) noted that average increments in India fell from 8.6 percent in 2019 to 3.6 percent in 2020, with only 40 percent companies giving increments.

Phase-2 of the survey provided insights on the impact of COVID-19 on market trends with respect to salary increments, bonus payments, performance management, hiring, and other important aspects of human resource practices in India.

Pay up? Not quite

According to the survey findings, only 4 of the 10 surveyed companies in India have given an increment in 2020 and 33 percent companies have decided not to give an increment at all. The remaining organisations are still undecided. Consequently, for 2020, average increment at 3.6 percent is less than half the increment of 8.6 percent that employees received in 2019. This number is among the lowest in decades.

If we only consider organisations that gave an increment, the average increment in 2020 is 7.5 percent. Less than 10 percent companies have given an increment equal to or more than 10 percent in 2020 and the proportion of such companies has dropped drastically since the start of the lockdown in March 2020.

The survey points out that the two most important factors that have affected 2020 increments are the timing of increments and the potential impact of COVID-19. Organisations that had already decided their increments before the start of the lockdown in March 2020 have given a higher increment compared with others. Moreover, organisations expecting a decline of more than 20 percent in revenue in FY 2020−21 due to COVID-19 have given much lower increments.

In the words of Anandorup Ghose, partner at DTTILLP, “Pay increases have been slowing in India over the past few years in line with the trajectory of the economy and rising margin pressures. However, with COVID-19 pulling the global economy into a recession, organisations have had no choice but to reduce or halt increments as they evaluate every incremental rupee spent. When revenues are harder to come by, companies usually go into a cost-saving mode.”

The study finds that actual increments across sectors have been lower than what were projected six months ago. No industry witnessed an average double-digit increment in 2020. Increments were the highest in the life sciences sector and the lowest in the manufacturing and services sector (particularly in the real estate, construction, metals and mining, hospitality, retail, and automobiles industries). Even the digital/e-commerce industry, which is known for giving double-digit increments, has struggled to match its past figures. Also, larger organisations (by consolidated revenue) have given a lower increment compared with relatively smaller companies. They also witnessed a bigger drop in increment due to COVID-19.

Anandorup Ghose, offered further perspective, stating, “Prior to the lockdown, increment decisions have largely been backward looking with the past year’s performance determining the increment budgets. COVID-19 has brought a big change to the process this year. Organisations are taking into account the likely future performance while deciding increment budgets.”

The survey also asked organisations in India if they plan to give increments in 2021; only 23 percent companies said yes. Given the uncertainty in the business outlook, most companies across sectors have not taken a definitive stance on 2021 increments yet and will decide on the basis of future performance. Increment decisions of 2020 and 2021 are also intertwined. About 38 percent companies that gave an increment in 2020 have decided to give increments in 2021 as well.

Other key findings from the Survey

The study finds that apart from managing increments, HR teams are helping organisations save costs by implementing a number of critical measures. These measures include a reduction in promotions; placing fewer employees in the exceeds expectations category; applying discretion while making bonus payouts; cutting discretionary spending; revising incentive plans and pay-mix; and altering HR policies, benefits and allowances.

Organisations are trying to make-up for lack or reduction in financial rewards by investing in work-from-home enablers as well as digital learning, development, and engagement of employees. Best-in-class organisations are providing employees additional allowances for buying ergonomic office furniture and COVID-19 essential kits. Keeping the morale of employees up has also been another big focus area for organisations. Organisations are trying to keep employees engaged in this virtual environment through virtual leadership connects, emotional and mental health counselling, and fitness sessions.

“The past couple of quarters have been extremely challenging, particularly for HR teams in most parts of the world that have had the difficult task of managing employee expectations while ensuring health, safety, and productivity with ever-shrinking budgets. It is great to see HR leaders respond to this crisis with resilience and innovation.” said Anandorup Ghose as he rounded things off.

The 2020 DTTILLP Workforce and Increment Trends survey was launched in June 2020 as a B2B India-specific survey. The primary audience for this survey was seasoned HR professionals. About 350 organisations participated in this edition spread across seven sectors and 25 sub-sectors. The voluntary survey was conducted through Deloitte’s proprietary online tool. The responses received from the participants were validated and checked for accuracy, and intended interpretation. India, wherever mentioned in the document, reflects the collective views of only the survey participants.

2021, 2020, and 2019, wherever used in this press release, refer to the 2021−2022, 2020−2021, and 2019−20 fiscal years, respectively.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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