Salary hikes this year may not lead to higher in-hand income. Here’s why Today News.

Salary hikes that companies are planning to give employees this year may not lead to higher in-hand income in view of the new definition of wages proposed by the government, according to a new annual salary increase survey.

If organisations are required to pay more towards employees' provident fund under the proposed labour code rules later this year, the in-hand salary may not rise despite better increments.

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Aon Salary Increase Survey

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The latest salary increase survey conducted by global professional services firm AON indicated that 88 per cent of the companies were willing to increase the pay of employees in 2021. The survey predicts an average salary hike of 7.7 per cent for employees in India, higher than the 6.1 per cent in 2020. As part of the survey, AON gathered responses from 1,200 organisations across 38 industries.

"There is a much higher percentage of companies projecting increments in the 5-10 per cent range as compared to 2020," the survey said.

Roopank Chaudhury, a partner in Aon's human capital business in India, said the highest-paying sectors in 2021 will remain the same as 2020 — Information Technology, ITes, life sciences, e-commerce and FMCG.

Those working in e-commerce, VC-backed companies are likely to get the highest increment at over 10 per cent, followed by IT companies at 9.70 per cent. ITes companies are likely to give an average increment of 8.8 per cent, followed by the gaming or entertainment industry at 8.10 per cent. Those working in the chemicals industry are also like to get an increment of 8 per cent.

Higher increment, but

But there is a catch. While the projected increments seem higher in comparison to 2020, Chaudhury highlighted that it is possible that salary increments may not translate into higher in-hand income for employees.

In case companies choose to pay higher provident fund contributions under the new definition of wages, salary hikes may not lead to an increase in in-hand salary for employees.

Companies are expected to review their compensation budgets in the second half of the year after the financial impact of the labour codes is known, according to Nitin Sethi, partner and CEO of Aon's performance and rewards business in India.