India Inc to dole out 10.8% salary hike in 2016: Report

New Delhi: Indian employers are expected to shell out an average salary hike of 10.8 percent to their staff in 2016 despite being less upbeat on the business outlook, but the inflation will end up eroding much of the increments, says a Towers Watson report.

According to the Towers Watson 2015-16 Asia-Pacific Salary Budget Planning Report, "India is expected to see an overall projected salary increase of 10.8 percent. Factoring inflation at 6.1 percent, the net salary increase in 2016 is expected to be marginally higher at 4.7 percent as against 4.5 percent last year, when inflation was at 5.9 percent."

The projected higher overall salary increases are despite the fact that around 58 percent employers in the third quarter are less upbeat on the business outlook for India than they were in the first quarter, the report said.

"Companies need to be smart about how they use limited salary budgets, because high volatility and talent crunches are causing frequent shifts to pay," Sambhav Rakyan, Data Services practice leader Asia Pacific at Towers Watson, said.

"Employers may be bearish in thinking there is a weak business outlook given the current poor market data, but the case is the opposite for employees, who hold bullish expectations for salary rises. Employers will need to carefully manage employees' longer term expectations, if they are to achieve a content workforce," Rakyan added.

Meanwhile, across employee levels, the "top performers" are likely to get higher increases averaging 12.5 percent, while "above average" and "average" performers may get 11 percent and 9.7 percent raises, respectively.

"To reward employees based on their performance, offers them a great incentive and also reflects growing market maturity. It also shows rising competition for talent," he said.

Sector-wise, the energy sector has the highest actual projected salary increase in 2016 at 11.5 percent, followed by the high tech sector at 10.7 percent. While for the financial services sector, which has traditionally seen higher pay increases, it would be a modest 10.4 percent.

Meanwhile, salary budgets in APAC region are set to rise 6.8 percent in 2016, higher than 6.6 percent in 2015. But once inflation is factored in, average increases will be 3.4 percent next year, compared to 4.1 percent this year.

The survey noted that in 17 of the 22 Asia Pacific markets covered by the survey, employees will go home with less money next year.

In East and Southeast Asia, the biggest overall increases for 2016 will be in Vietnam (10.4 percent), Indonesia (9.4 percent) and mainland China (8 percent)-- all higher than last year.

However, once the inflation is taken into account, real increases in these countries drop to 3.9 percent, 5.6 percent and 5.8 percent respectively.