This appraisal season, you may get the highest salary hike in 6 years

The top brass at firms shall in 2022 get a raise that is the highest in the last five years while overall salaries of employees are likely to be hiked to the highest level in six years as companies look to retain talent, a survey has found.

Trends suggest the hikes are expected to be buoyant over the next 24 months and that the median CEO compensation has reached Rs 7.05 crore, an Aon survey released on Wednesday added.

“With fundamentals of the economy remaining strong and business sentiments being positive, there were strong tailwinds which resulted in Top Executives salary increase to be projected at 8.9 percent, highest in the last half a decade,” Aon said in a presentation. The forecast is against a 7.9 percent actual hike in 2021, per the survey.

Among sectors, top executives in manufacturing are likely to see the maximum hike of 9.3 percent while the consumer sector may see the lowest, which is projected at 8.1 percent, up from 7.7 percent last year.

Image credit: Aon’s 11th annual Executive Rewards Survey

Nitin Sethi, partner and CEO, India for Human Capital Solutions at Aon, said in the wake of the COVID-19 pandemic, talent is in short supply and the cost of attracting, retaining and engaging leadership talent that grows business is rising rapidly.

And so, not only is the average executive compensation increase the highest in five years, but variable pay and equity grants have also risen as companies cannot risk losing key talent at senior levels as this has implications on delivering business performance, he said.

Pay at Risk — which is the sum of variable pay and long-term incentives (LTI) to total compensation — for CEOs stands near 60 percent, while C-level executives including the chief operating officer, chief financial officer, sales head and chief human resources officer following closely behind at 50 percent, the company said in its statement.

Moreover, the annual long-term Incentive for CEOs on average is 125 percent of fixed pay, Aon said, adding that most firms use a mix of performance and retention-based grants, with at least 50 percent of the grant amount linked to performance measures such as shareholder return, profit, revenue and cashflows.

Meanwhile, employees are overall projected to see a 9.9 percent increase in their salaries this year, which is the highest since 2017, as per data provided by Aon. The multinational professional services firm collected data from 475 companies across 20 industries for its survey.

Source: Aon’s 11th annual Executive Rewards Survey

When asked if the mass firing scenario in the startup space has been factored in the survey, Pritish Gandhi, director and practice leader, India for the Executive Compensation and Governance Practice at Aon, said his firm doesn’t see layoffs impacting salaries increasing.

“Buoyancy in salary increases shall continue as companies are looking to solve the larger talent puzzle,” he told CNBCTV18.com in a webinar.