Dec 19, 2008

India - 'India Inc may not raise salaries in 2009'

Anticipating a decline in its business performance in 2009, India Inc is likely to cut back on the planned salary increase in the coming year, while most firms want to avoid huge job cuts, a latest survey says.

Majority of companies in the country are trying to be selective in planning the workforce, compensation and benefit cuts for 2009, while they anticipate a decline in their company's business performance in 2009, according to global HR consultancy Mercer.

The survey revealed that as much as 83 per cent of companies expect salary increases in the coming year to be lower than originally planned by them. The responses indicate that the companies are planning to look closely at holding down the level of compensation increases in 2009.

However, only 19 per cent of survey respondents are considering the more drastic step of freezing 2009 salaries at 2008 figures.

The results for companies in India generally match survey findings from other parts of the world. In China, Australia, the UK and the US as well between 20 and 30 per cent respondents believe that the 2009 bonus payout would be reduced from those originally planned.

"India grew on the back of her knowledge and people-centric industries such as financial services, information technology and retail, among others. However, primarily due to employee costs having risen in India at double-digit rates since 2003, cost structures have been coming under severe strain," Mercer Consulting (India) country leader Padma Ravichandar said.

Most companies in India plan to avoid significant workforce reductions, but they do not plan significant hiring either, the survey revealed.

Nearly two-thirds (63 per cent) of companies surveyed revealed that a significant reduction in workforce was unlikely even as only one in four firms expect to continue their hiring activities at or above replacement levels.

This current situation should be perceived as a cooling-down period in terms of talent costs. This is a levelling act which may help India remain cost competitive in the long run. In the near term, the adverse impact of business sentiment seems all pervasive, Ravichandar added.

Over 80 per cent of respondents expect their company's business performance to decline in 2009, the Mercer survey noticed.

Further, corporate India expects mergers and acquisitions to be severely affected in the next year, with fewer than seven per cent of survey respondents expecting increased MandA activity.

Mercer's survey, conducted in early November, collected responses from over 100 human resource and finance professionals in India, as part of more than 1,000 responses from around the world.

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