New Delhi | Jagran Business Desk: Indian companies are expected to offer an average 7.7 per cent hike in salaries this year, according to the India Salary Increase Survey conducted by consulting firm Aon. However, the salary hike may not result in higher take-home salary if organisations choose to pay more in provident fund (PF) contributions due to the new definition of wages proposed by the government, according to a study.

The Salary Increase Survey in India, conducted across 1,200 companies from more than 20 industries, said that while salary increments indicate stronger recovery than expected, the Code of Wages could be a gamechanger.

According to the study, 88 per cent companies said that they intend to increase the salaries in 2021. The survey has projected a 7.7 per cent increase in average salary in the year 2021. This is up from the actual increase of 6.1 per cent in 2020.

"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," Nitin Sethi, partner and Chief Executive Officer of Aon's performance and rewards business 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," he added.

According to the survey, Information Technology, Information Technology enabled Services, Life Sciences, E-commerce and Fast-Moving Consumer Goods will be the highest paying sectors in 2021.

Sethi, however, noted that the impact of the codes would be minimal, as most of the large companies in India pay 35-40 per cent of the CTC as basic pay.

Posted By: Abhinav Gupta