India Inc budgets 70-90% bonus to retain talent
India Inc. is expected to hand out more than 90% of the variable pay in the upcoming appraisal season as annual increments are expected to be muted like the last time.
“Unless there are massive swings in organizational/macro realities (like covid/global financial crisis), usually bonuses do not dramatically change and remain in the 90 -110% of the target range for most companies in the manufacturing, consumer and life sciences sectors,” said Anandorup Ghose, partner at consulting and audit firm Deloitte India. “Financial Services and tech can be a little more volatile.”
While hiring has eased since the post-pandemic frenzy, especially among information technology services sector, costs remain elevated as companies had doled out fat hikes and bonuses as the war for talent raged.
The compensation is usually split into fixed and variable pay, which increases as a percentage of total salary with seniority. And the variable payouts or bonuses are linked to both the employee and the employer’s performance.
“The bonus numbers remain similar (to last year) as the improvement in some sectors has been offset by a decline in sentiment for other sectors,” said Roopank Chaudhary, partner at human capital solutions for consulting firm Aon. The consulting firm estimates a 9.5% hike in salaries in 2025 compared with an actual increase of 9.3% in the 2024 appraisal season earlier in the year. The average hike was 9.7% in 2023 and 10.6% in 2022.
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The company, which works on compensation and rewards for firms across sectors, said the share of bonus in the total salary was 13.6% on an average and is expected to remain unchanged in 2025.
Average bonus was 14.5% of the total salary in 2022 as companies fought hard to retain talent amid high attrition right after the pandemic in what was dubbed ‘The Great Resignation’. As the churn eased, muted hiring brought down this share to 13.6% and is expected to remain unchanged in 2025, according to estimates Aon shared with Mint.
For the IT sector where manpower costs are above 65% of a firm’s expenses, bonuses can be one way of retaining talent as cost pressures since the hiring frenzy of 2022 persist.
On an average, bonus ranged 15-16% of the total pay from 2014 to 2019, dipped again to around 13% during the two years of Covid (2020 and 2021), before rising in 2022.
The HR head of one of the top three private lenders said their firm had rolled out 70-90% of the variable pay for 2024 and it’s expected to be similar for 2025. “17% of one’s compensation is dependent on variable pay and we will not change it,” said the executive who didn’t want to be identified.
For the IT sector where manpower costs are above 65% of a firm’s expenses, bonuses can be one way of retaining talent as cost pressures since the hiring frenzy of 2022 persist. The hikes were 5-8% and most got 100% bonuses the last time, said the HR head of one of the largest mid-tier IT firms. In the coming year, the executive said, IT firms will look at a similar range.
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A top e-commerce startup rolled out 80-90% of its variable pay last year, according to a senior executive, with the highest performers getting as much as 120% of their eligible payouts. “The policy payouts for 2025 will mostly depend on the organization’s growth,” the executive said. “Given that the festive season is expected to be good this year, we can expect similar trends.”
Tata Consultancy Service Ltd, India’s largest software services company, gave double-digit wage hikes to top performers and an average salary hike of 4.5-7% to the rest from 1 April. Wipro followed with about 4-8% to employees from 1 September. Meanwhile, Infosys Ltd and HCL Technologies Ltd have yet to announce salary increases for their employees.
Bonuses for those in senior roles in sectors such as manufacturing and financial services are expected to be higher than 2024, said Navnit Singh, chairman and regional managing director of executive search firm Korn Ferry. “The top brass could get more than 100% bonus.”
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