Companies that follow the January-December performance cycle are projecting lower pay increases at an aggregate level for FY23 compared with FY22 despite inflation challenges, according to data Deloitte India has shared exclusively with ET.

Not all sectors will see a reduction in pay increases though. Some sectors, including hospitality, travel, tourism, consumer/FMCG and power, are outperforming others and will give employees better hikes than FY22, as per data from about 300 companies, most of them multinationals.

Service sectors, which were the hardest hit during the pandemic, will see bigger hikes as they benefit from the opening up of the economy.

In contrast, technology companies that rode the crest as the world moved online during the pandemic are projecting a drop in pay increases, mirroring the global tech slowdown.
“Pay increase projections are trending lower compared to FY22 given a softening of talent demand across certain sectors and, more importantly, for certain skill sets,” Anandorup Ghose, partner at Deloitte India, told ET. “However, not every sector will see a reduction in pay increases. So, while at an average there may be a 50-75 bps (basis points) drop in pay increase projections compared to FY22 actuals, a single number does not reflect the vastly different realities across industries.”

Across different subsectors in technology, there is a drop of 40-80 bps in pay increase projections for FY23 compared to FY22 actuals. A basis point is 0.01 percentage point.

Information technology product companies are projecting hikes of 11.3% in FY23 compared with 12% in FY22, while IT services are expected to be at 8.8% compared with 9.4% in FY22. Third-party IT services are expected to be at 7.8% in FY23 against 8.7% in FY22, while captive services are expected to see a smaller drop to 10.4% in FY23 from 10.5% in FY22.

Across services sectors, pay hike projections stand at 9.4% in FY23 compared with 8.9% in FY22. Pay in the hospitality, travel and tourism sector is expected to rise 9.6% in FY23 from 8.5% in FY22 though retail is broadly expected to remain flat at around 8.0%.

In the consumer/fast-moving consumer goods (FMCG) segment, increments are seen at 9.8% in FY23 against 9.0% in the previous financial year.

Manufacturing overall is expected to see a drop from 10.2% in FY22 to 9.8% in FY23. However, segments such as power – conventional and renewables – are expected to see an increase in compensation budgets. Renewables are expected to go up to 11% from 9.6%, while conventional power is expected to go up to 9.5% from 9%. The pharmaceutical sector is expected to be largely flat at 8.9%, little changed from 9.1% in FY22

The data was put together to gauge sentiment regarding pay increases. Companies that began the compensation correction cycle in January are at an advanced stage of finalising budgets. Most Indian companies tend to make corrections between April and June-July and therefore for many of them this timeframe is too preliminary to have a clear line of sight.