“Wages are forecast to rise by 14.4 per cent during 2008, fifth successive year of double-digit growth. This far outstrips wage inflation in China (8.6 per cent in 2007) and is second only to Sri Lanka, where wage growth has been driven by high inflation,” global management consultancy firm — HayGroup said.

Staff turnover

The high level of demand for experienced employees is driving wage inflation and creating a culture of job-hopping. Staff turnover of 20 per cent or more is not unusual in high-demand sectors such as the service industry, as talented workers jump from employer to employer, following the promise of even higher wages. “Reward programmes of companies are in crisis as wage inflation is witnessing an upward spiralling and staff turnover rates hit new highs,” the firm said. “In an environment where employees can achieve a pay rise of between 40 per cent and 50 per cent by moving to a competitor, they are unlikely to stay put,” HayGroup added.
In 2007, middle management level witnessed the maximum increase in average annual base salary (16 per cent), while supervisory, senior management and the executive level had an average annual increase of 14 per cent in their base salaries.

India which has earned a reputation as a source of keen, talented, educated and English-speaking employees, particularly in the IT and service sectors is rapidly witnessing a change in its perception.
“While there is no shortage of graduates in India, there is real concern about quality of new recruits,” it said, adding that the country’s universities produce three million graduates a year but only a fraction are considered suitable for employment in the business processing and IT outsourcing industries. One of the reason behind wage inflation is faulty education system in the country.