Average increments to drop to 9.1% in 2023 across sectors: Study

Average increments are likely to drop to 9.1 per cent this year in almost all sectors following inflation, higher interest rates and a slowdown in the economy, according to a study.

The average increment in 2022 was 9.4 per cent, Deloitte India Talent Outlook 2023 stated on Wednesday.

The study found that in 2023 increments are expected to be lower across almost all sectors, compared to 2022 actual increments.

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While the Life Sciences sector is expected to witness the highest increments in 2023, the IT sector will likely witness a major drop in increments as compared to last year, the study said.

Additionally, attrition in India reached 19.7 per cent in 2022, up from 19.4 per cent in 2021, it stated.

"The significant attrition levels across industries in late 2021 continued until early 2022. We saw Indian organisations budgeting the highest increment in 2022 over the last four years. What they also did was hire aggressively. This led to employee costs rising faster than revenue growth over the last 3–4 years in almost every other company.

"Stubborn inflation, higher interest rates, and a slowing economy are likely to make organisations more cautious this year. We expect increments and attrition to witness lower trends in 2023,” Deloitte Touche Tohmatsu India LLP (Deloitte India) Partner Anandorup Ghose said.

The Deloitte India Talent Outlook 2023 study is based on a survey in January 2023, done among 300 organisations across seven sectors and 25 sub-sectors.

Meanwhile, the study further observed that while almost three in every four organisations recognised the value of a common skills framework primarily for learning and development and career progression, around 42 per cent did not revise their framework regularly to contextualise it to changing business requirements.

Additionally, the study found only 19 per cent of organisations - mostly in the IT, ITeS, and Consumer sectors - confirmed that their employees have visibility of skills beyond their current role. This indicates a major gap in the awareness of skill requirements and associated learning, Ghose said.

This aspect is further pronounced by the fact that more than 80 per cent of organisations reported that leadership teams have no structured data or reporting mechanisms to understand the current skill capital, it noted.

The study found that 27 per cent of organisations have gone beyond their permanent workforce and invested in skills-based training for gig workers while 13 per cent reported planning to do so.

Meanwhile, the study stated that as technology has come to the forefront for businesses in a post-Covid-19 operational context the Manufacturing and IT sectors have emerged as the biggest investors in HR Tech in 2022.

These two sectors have the lion's share of the tech portfolio being dedicated to cloud-based applications and data analytics tools for enhancing talent management processes, it added.

Further, it stated that 47 per cent of organisations are investing in responsible AI for reimagining their talent acquisition process and nearly 40 per cent are focused on integrating machine learning to predict employee turnover.

However, the adoption of new technology continues to be an ongoing challenge as 27 per cent of organisations said that there are major challenges in the integration of new technologies with their existing tech platforms, it said.

There is a clear scope for service providers to plan for ecosystem compatibility from an integration as well as a long-term change management and adoption standpoint, it added.