There is no realistic salary scale for India - how you can still determine market wages and salaries
In India, the new financial year began on April 1, 2024 - often the right time for your Indian employees to make new salary demands from you. It is also a useful moment to think about your salary structures in your Indian subsidiaries or joint ventures.
For you as a company, this means deciding which salaries are considered market standard for which position and location. But this represents a major challenge for European employers, because you will look in vain for reliable data sources on salary levels in India.
On the one hand, data published (online) comes - directly or indirectly - from interest groups that would like to see their own group preferred in the market. On the other hand, as in so many areas in India, transparency is also in short supply when it comes to salary levels. Furthermore, for numerous reasons, salaries in India are much more spread out than in the European market.
bew“Average income” measurement parameter
Statements about the Indian average income provide little information about the actual wage level in the industry and company size you are interested in.
The regional income differences between the metropolitan regions of New Delhi, Mumbai, Pune, Bangalore etc. and their surrounding areas are significant. The further you move from the big cities with their comparatively high costs of living, the more market income decreases - exponentially.
The same applies to the salary differences according to hierarchy levels and professional experience, which are much more extreme than in Germany, for example. While in Germany the salary of the management is on average three to six times higher than that of the secretariat, in India this gap can quickly increase to 20 to 50 times.
Internal company network as a source of information
Your internal Indian network in the “salary level” area is also unlikely to function reliably. If you ask your Indian management, you will get a political reaction rather than a reliable answer. The salary question you ask already signals to your Indian counterpart that there could be an impact on their own status. However, when it comes to status, there are cultural differences that Western companies often do not take sufficient account of. Comparison with other people is characterized by the constant social struggle regarding one's own position. Social reputation in one’s own community is therefore vitally important.
A rise in the company's hierarchy level can therefore also be a lucrative "goodie" beyond the remuneration, although such "dry promotions" have significantly lost popularity in recent years, especially in the higher income brackets.
However, the company you work for is still crucial for your social reputation. An employment relationship with a German company is highly regarded - so many Indian employees continue to wear their company "badge" on their clothes, even on weekends.
Cultural differences in employee “self-assessment”.
Another manifestation of the above-mentioned social structures can also be seen in the (frankly) often lack of ability to adequately reflect on one's own work performance. People often avoid making themselves comparable out of fear of lowering their own social status. India is therefore not a culture in which it is customary to openly communicate about mistakes and deficits. What can certainly still be developed in Europe simply does not exist in India. In our business practice, for example, we repeatedly experience that employees have an inflated self-assessment. Even in anonymized feedback questionnaires about their own work performance, employees of a company regularly give themselves the highest possible number of points. Colleagues' work performance is usually rated with the worst possible point value. A phenomenon that we do not encounter in Europe, China and the USA.
Forced salary increases as a danger for companies
This also results in excessive expectations of your own salary increase. India's wages have generally risen significantly in recent years. The economy is going well, good skilled workers are not always easy to find, and retaining them is difficult because regular job changes with correspondingly large salary jumps are more common than in Europe. In particular, the current shortage of skilled workers means that qualified Indian employees can realize numerous lucrative opportunities on the labor market and are therefore in an extremely favorable negotiating position for them. Against this background, many European companies are at risk of giving in too quickly to their employees' excessive salary demands. Such companies will then no longer be able to keep up with these salary increases in the future and will run into difficulties in the long term due to wage levels that are too high.
High inflation as a salary argument
In addition, inflation (actual and perceived) in India has been significantly higher in the last few decades than it is currently and certain automatisms have been retained from this time. Demands for wage increases of 15-20 percent per year can also be explained from this point of view.
However, since the forecast actual inflation will continue to fall in the next few years and the perceived inflation will adjust accordingly, salary expectations will probably also adjust accordingly.
Evaluation catalogs and target agreements as management tools
Another shortcoming is often the lack of target agreements based on objectively measurable evaluation criteria that companies could use to appropriately classify their employees. If they exist at all, evaluation catalogs in Indian companies are usually designed with too much scope for interpretation or are borrowed from the Western parent company and are therefore unsuitable for the specific Indian circumstances. Making the quality of employees objectively measurable is certainly always difficult. However, European companies should refrain from reflexively adopting Western target agreement formulations if they do not want to get into constant conflict with their workforce. The premises underlying their Western assessments and terminology usually differ considerably. For India, we therefore recommend developing much more detailed target agreements with the employee than is usual in Europe.
How do you get reliable information about the market salary level?
To be honest, you can only get reliable statements about market remuneration through years of personal experience and/or through a network of local Western HR experts that has been established over many years. In any case, a detailed evaluation catalog tailored to India's specific requirements with corresponding service agreements is helpful. Then salary negotiations can also be used as an opportunity to manage an employee, with targeted rather than arbitrary negotiation results.
Recruiting personnel, conducting salary negotiations and adjusting salary structures have been our “day-to-day bread and butter” on site for years. We can actively support you in realistically assessing the value of your employees' work in India and creating an appropriate wage level. We know how to motivate your employees to perform at their best and create a successful team.
Ask us.
