Indian companies to give bumper salary hike in 2021, but your take home pay will still not increase --Here's why

New Delhi: Indian firms are likely to offer a bumper pay hike, however, it is also possible that some of the salary increments may not translate into higher take home pay for employees if organisations choose to re-structure the pay packages on the line of new definition of wages, says a survey.

Companies in India are 7.7 percent salary increase in 2021, one of the highest among the BRIC nations, and higher than the average actual increase of 6.1 per cent in 2020, Global professional services firm Aon Plc that released insights from its latest Salary Increase Survey in India said.

"We expect organisations to review their compensation budgets in the second half of the year once the exact financial impact of the Labor Codes is known. It is also possible that some of the salary increments may not translate into higher cash-in-hand for employees if organisations choose to pay higher provident fund contributions on the new definition of Wages," ," Nitin Sethi, partner and Chief Executive Officer of Aon's performance and rewards business in India, said.

As per the survey 88 percent of the surveyed companies reported that they intend to increase salaries in 2021, as compared to 75 percent companies in 2020, reflecting positive business sentiment.

The study analysed data across 1,200 companies from more than 20 industries noted that while salary increments indicate strong recovery, the Code of Wages could be a gamechanger.

The proposed definition of wages under the new Labor Codes could lead to additional compensation budgeting in the form of higher provisioning for Benefit plans like gratuity, leave encashment and provident fund, Sethi noted.

As per the survey, sectors with the highest projected increases include, e-commerce and venture capital, hi-tech/information technology, ITeS, life sciences. On the contrary, sectors with the lowest projected increases include hospitality/restaurants, real estate/infrastructure, engineering services.

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With PTI Inputs