Your salary hikes could shrink this year: Here's why
What's the story
According to a recent report by Aon, a global professional services firm, Indian employees will witness a slowdown in salary growth in 2025.
The Annual Salary Increase and Turnover Survey predicts an average rise of 9.2% in salaries, the slowest pace in three years.
This is a marginal decrease from last year's 9.3% increase and way lower than the post-pandemic recovery surge of 10.6% in 2022.
Wage stagnation
Private sector's reluctance to increase wages despite profitability
The survey, which studied over 1,400 companies across 45 industries, found a reluctance among private sector firms to raise wages.
This trend is apparent even as these companies have maintained a stable EBITDA margin of 22% over the last four years and have become more profitable.
Notably, the IT services sector has witnessed particularly moderate wage growth during this period.
Sector analysis
Manufacturing and automotive sectors to lead salary hikes
The Aon survey also highlighted sectors that are likely to lead in salary hikes this year.
Manufacturing, automotive, and global capability centers (GCCs) are expected to give the highest raises.
In fact, engineering design services and automotive manufacturing are gearing up for a 10.2% salary hike.
GCCs and retail sector are also going to reward their employees with hikes of 9.7% and 9.8%, respectively.
Tech slowdown
IT and tech services to witness lowest salary hikes
Unlike other sectors, IT services are expected to see the lowest salary hikes at 7.2% this year. This comes amid a global slowdown in tech hiring and spending.
Likewise, technology consulting and services are expected to see a modest increase of 7.7%, continuing the downward trend in salary growth in these industries.
Sector forecast
Real estate and banking sectors: A look at salary hikes
The real estate sector is also expected to witness a slowdown in salary hikes, with an expected increase of 9.7% this year, down from last year's 10.6%.
The banking sector is expected to see a rise of 8.8% in salaries for 2025, according to the survey findings.
However, non-banking financial companies (NBFCs) are likely to offer a hefty pay rise of 10%.
Labor trends
Attrition rates drop as labor market stabilizes
The Aon survey also noted a decline in attrition rates, showing that the labor market is stabilizing.
The overall attrition rate declined to 17.7% last year from a peak of 18.3% in 2023 and 21.4% during the "Great Resignation" phase in 2022.
This indicates that the hiring frenzy has cooled down, with a bigger talent pool now at the disposal of employers.