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The survey by leading consultancy Deloitte Touche Tohmatsu India LLP showed that timing and potential impact of COVID-19 were the two most important factors that affected increments in 2020-21.
“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, organizations expecting a decline of more than 20 percent in revenue in FY 2020-21 due to COVID-19 have given much lower increments,” the survey released on Monday said.
A nationwide lockdown was imposed from March 25 to curb the spreading of coronavirus infections and in late May, authorities started to relax the restrictions. However, various restrictions continue in some states in the wake of a rising number of coronavirus cases. COVID-19 and subsequent lockdowns have also disrupted economic activities.
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“Only 4 of the 10 surveyed companies in India have given an increment in 2020 and 33 percent of companies have decided not to give an increment at all. The remaining organizations are still undecided. Consequently, for 2020, the 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,” the survey said.
In this case, 2020 and 2019 refer to financial years 2020-21 and 2019-20, respectively.
Deloitte noted that if only organizations that gave an increment are considered, then the average increment in 2020 is 7.5 percent.
“Less than 10 percent of 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,” it added.
As per the findings, actual increments across sectors have been lower than what has projected six months ago and no industry witnessed an average double-digit increment this fiscal.
“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 organizations (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,” it added.
According to the survey, apart from managing increments, HR teams are helping organizations save costs by implementing a number of critical measures, including a reduction in promotions, cutting discretionary spending, and revising incentive plans and pay-mix.
Anandorup Ghose, Partner at Deloitte Touche Tohmatsu India LLP, said pay increases have been slowing in India over the past few years in line with the trajectory of the economy and rising margin pressures.
“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. Organizations are taking into account the likely future performance while deciding increment budgets,” Ghose said.
Given the uncertainty in the business outlook, the survey said most companies across sectors have not taken a definitive stance on 2021 increments yet and would decide on the basis of future performance.