Poor visibility pushes India Inc to rework pay hike plans

While Deloitte had estimated an average pay hike of 8.8%, Aon had predicted 9.2%. However, actual pay hikes may be even lower in some sectors, executives at these firms said on the condition of anonymity. Revisions are likely particularly in businesses feeling the strain of geopolitical crises, tariff disputes, and cautious client decision-making.

In a client note in March, Deloitte had said that the actual pay hikes in FY25 were 9%, against 9.2% it estimated earlier. The consultant said that even though the change was minor, it showed that companies were more bullish about increases than they were eventually able to afford. “For the coming financial year, the data reflects further caution as the aggregate pay increase projection across sectors is expected to be approximately 8.8%,” said the note, seen by Mint.

Anandorup Ghose, a partner at Deloitte India, agreed hikes may be even lower than 8.8% in some sectors, attributing it to multiple global uncertainties.

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“This year, a lot of externalities are evolving for companies across sectors – there are geopolitical tensions that cannot be fully accounted for, there are macroeconomic concerns based on tariff agreements as well as aspects such as uncertainties in domestic consumer demand resurgence etc.,” Ghose told Mint.

He said the impact will be widespread: “Given the width of these shifts, it is difficult to identify any one set of industries that will get affected – most will have some implications one way or another.”

Consultant Aon’s Annual Salary Increase and Turnover Survey 2024-25 India in March had projected a 9.2% increase this year, against last year’s estimate of 9.5%. The actual average hike in 2024, according to Aon, was around 9.3%.

“Most companies continue to adopt a cautious approach while rolling out hikes. The impact of the tariffs—if they were to come through—is likely to be felt only from the next cycle and over a period of time for some select sectors such as banking and possibly IT-enabled services,” said Roopank Chaudhary, a partner at Aon specializing in human capital solutions. Chaudhary too agreed the actual pay hikes in some sectors may be below their estimates.

According to Aon’s survey, the banking sector is expected to offer around 8.8% this year, and the IT-enabled services sector was pegged to give a hike of 9.7%.

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However, Aon sought to temper concerns about drastic cuts, stating it was “not seeing any immediate downward projection on salary hikes,” Chaudhary told Mint. Nevertheless, the firm indicated that certain sectors are more vulnerable to the current headwinds.

In the technology sector, Tata Consultancy Services (TCS) has already postponed wage increases, citing the “uncertainty in the environment.” Chief human resources officer Milind Lakkad told analysts in a post-earnings call that the company will wait for clarity to emerge before deciding on wage hikes.

Companies with appraisals held across May and July are particularly likely to revise their initial hike plans, according to consultants and HR executives.

“We offered a 7-9% increment, whereas last year it was 9-10%. But we know that some of our competitors have revised their hikes given the slump in the job market and poor visibility in the business,” a senior executive at a major BFSI firm said on the condition of anonymity.

Several factors are prompting the rethink. A sluggish job market, coupled with instances of over-hiring in recent years, has led some to curb aggressive recruitment. Additionally, companies with significant exposure to the US market are increasingly wary of potential policy changes.

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US President Donald Trump’s sweeping tariff proposals and a 90-day trade pause have injected significant volatility into global trade and financial markets. Steep American levies on China have raised concerns about a flood of inexpensive exports into other markets, impacting industries from steel and textiles to fisheries and raising fears of prolonged disruption. These uncertainties compound existing global challenges, including Russia’s ongoing invasion of Ukraine and the war in West Asia.

Some companies are exploring alternative compensation models.

“Our hikes are around 10% similar to 2024, but we will bring in variable pay in the junior and middle orders. This was not there earlier, but companies need to be prudent, and this way, work becomes more performance-linked in these choppy markets,” said the HR head of a prominent energy firm. Variable pay, typically comprising around 30% of an employee’s total cost to the company, ties a portion of compensation to performance metrics.

For Indian employees, the current job market increasingly favours those with specialized skills, potentially limiting immediate job mobility and giving companies more leeway to adjust their compensation plans.

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