EY predicts a 9.6% average. salary increase for India Inc. in 2024; attrition decline nears pre-pandemic levels

  • The top three sectors in terms of projected salary increase are e-commerce, professional services, and financial services.
  • Super niche skills like Artificial Intelligence, Machine Learning command a premium of 30-50% in 2024

According to the second edition of EY ‘Future of Pay 2024’ report, India Inc. is set for an average salary increase of 9.6% in 2024, similar to the actual increase in 2023. Overall attrition dropped to 18.3% in 2023 (from 21.2% in 2022) and is set to gradually decline over the next few years as companies prioritize cost management and employee wellbeing, stabilizing the workforce amidst high talent demand. 

In light of India’s position as a global hub for technology and outsourcing services, the EY report highlights that e-commerce is expected to have the highest salary growth in 2024, at 10.9%, followed by financial services with a projected growth of 10.1%. The salary of professionals in professional services is projected to grow by 10% in 2024, suggesting a rebound as companies invest in strategy alignment to navigate global business complexities. The impact of real estate and infrastructure emerging as a growth sector is also visible, as increments remain stable at 10%. 

According to the EY report, 35% to 40% of the technology workforce comprises digital talent, which is expected to become more crucial in the future. Among digital skills, super niche skills like Artificial Intelligence (AI), Machine Learning (ML), and Blockchain skills are highly sought-after, commanding a premium of 30% to 50%.

Reflecting on the key findings, Abhishek Sen, Partner and Leader, Total Rewards, HR Technology and Learning, People Advisory Services, EY India, said, “As we unveil our second edition of the ‘Future of Pay’ report, we provide industry stakeholders with a compass to navigate the ever-shifting landscape of Total Rewards. While the overall average salary increase in India Inc. holds steady compared to last year, certain sectors such as e-commerce, financial services and professional services firms are poised for significant pay raise in 2024. There is also a discernible trend towards embracing a more comprehensive Rewards Value Proposition (RVP) to drive better ROI across all industries. Going forward, organizations will harness the transformative power of AI to craft bespoke benefits packages, optimize reward procedures, and elevate overall employee satisfaction at workplace.”

Attrition across sectors

As per the report, India’s attrition rates have fluctuated, influenced by macroeconomic factors and internal corporate strategies. Overall attrition dropped to 18.3% in 2023 from 21.2% in 2022. The highest levels of attrition in 2023 prevailed across financial services (24.8%), professional services (24.2%) and information technology (23.3%). 

This year, voluntary attrition decreased slightly, while involuntary attrition rose, particularly among global companies, indicating layoffs in the IT and startup sectors due to global economic changes. Indian companies, however, showed resilience and performed better, experiencing less impact from economic shifts. Looking forward, attrition is expected to gradually decline over the next few years as companies focus on cost management and increased employee well-being amid high talent demand, thereby stabilizing the workforce.

Trends in Total Rewards 

80% of the organizations emphasized the importance of “pay and benefits” and a need to move away from traditional employee benefits in the modern workforce. The top three areas of focus for employers are benefits cost planning (43%), employee wellness (29%), and evaluating and aligning with industry standards (20%). 

At 43%, variable pay plans (non-sales) are the most common type of incentive plan offered in the organization, followed by discretionary incentives (32%) and sales incentive plans (21%).  

The report reveals that in terms of job levels, Executives (CXOs) typically get the most variable pay, but their projected salary increases for 2024 are lower than those in 2023. Most employee levels are experiencing decreased variable pay percentages for 2024, except for the lowest-paid tiers, which might see a slight uptick. On average, organizations distributed variable bonuses equivalent to 15.05% of employees’ annual fixed cash in 2023. 

LTIPs are becoming increasingly diverse, flexible, and strategic 

The report highlights that organizations have been creatively revamping their long-term incentive plans (LTIPs) in recent years. Shifting from cash rewards to stock incentives, around 26% of companies focused on LTIPs for performance rewards in FY23. There is also a marked increase in penetration of this rewards component across non-CXO cadres, fuelled largely by the booming new-age digital enterprise growth in India.

Top talent trends as we head into 2024

Hybrid work cultures are gaining importance as they help enhance work-life balance, productivity, and satisfaction. Unique hiring trends are observed in various sectors, like the formation of ESG teams in the financial services sector. There is an increasing trend towards ESG reporting among Indian companies, with 60% of firms already utilizing or on their way to utilizing ESG policies.

Diversity, equity, and inclusion (DE&I) initiatives have become pivotal to corporate strategy. The top 3 DE&I initiatives are gender pay parity, defined DE&I policies, and a diversifying talent pool. 

AI and automated reward systems personalize rewards and streamline the reward process, reducing manual work. Going forward, companies are poised to utilize AI algorithms to customize benefits and improve employee satisfaction.

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