India Inc employees are returning to offices after two years. But their office wear, ride to the workplace, and lunch have become costlier and paychecks are worth less than they were during the pandemic as inflation bites.

An Aon survey noted in February average salary increments would touch a five-year high of 9.9 percent in 2022 after analysing data across over 1,500 companies. Deloitte's early projections also peg average salary hikes at 8.6 percent in 2022.

But will the hikes be enough to tackle the great resignation?

According to Aon, attrition rates dropped to 12.8 percent—the lowest in a decade—in 2020 before hitting a two-decade high of 21 percent in 2021. Also, the 21 percent attrition happened when most employees were still working from home. As per Deloitte surveys, attrition rose to 19.7 percent in 2021 against 15.8 percent in 2020 and 17.5 percent in 2019, owing to the great resignation wave.

Source: Aon

Experts feel better-than-pandemic pay increments alone are unlikely to cheer those adjusting their lives yet again by hiring costlier helps to do chores they did themselves, spending to refresh wardrobes, buying or renting vehicles to commute, setting aside more for driver and fuel expenses, and those spending again to make sure kids and elderly are taken care of until they return from work.

India's CPI (Consumer Price Index) inflation rose to an eight-month high of 6.07 percent in February 2022. The Russia-Ukraine war is making matters worse by choking supply chains, leading to increased costs for several consumer goods. With the employee-employer relationship evolving, firms this year may find workers pointing to high inflation as they demand more significant raises and better working conditions.

'Firms planning non-cash approach for retention'

"When an employee chooses to leave, they take into account 'total rewards'," Dinkar Pawan, director, Deloitte India, told CNBC-TV18. "They evaluate each facet of a financial reward—competitiveness of fixed compensation, bonus, stock awards, and benefits. They also assess the organisation's culture, quality of learning, and growth potential."

Source: Aon

Pawan said employers offering a wholesome value proposition would be more successful in retaining talent. "To tackle the great resignation, some firms are offering salary corrections, one-time bonuses, long-term incentives, and promotions to key talent. They are also exploring non-cash approaches like job rotation, flexible hours, upskilling, and faster career progression for long-term retention," Pawan said. He added he does not expect a significant uptick in attrition considering the macro volatility and retention strategies.

'Attrition may stabilise next year'

"Given the continuing demand for new-age tech talent, we see attrition numbers remaining high in 2022. They will likely stabilise by next year," Roopank Chaudhary, partner and chief commercial officer, Human Capital Solutions, Aon, told CNBC-TV18.

According to Lohit Bhatia, president of workforce management, Quess Corp, attrition should start stabilising in 2022-23, except for high growth segments like digital, IT, consulting, manufacturing, infra, e-com, and logistics. Bhatia also said companies would develop accelerated compensation models to benefit individuals who are delivering faster results.

Hikes would be a sticky subject for firms that report good profits. But Pawan said most could not "suddenly offer extremely high increments to all", given the current cost pressures companies face.

'Good news: Firms are differentiating for top talent'

Chaudhary said higher hikes would somewhat get mitigated due to the inflation. "The good news is that companies are differentiating strongly for their top talent, and increments for that category will go up as high as 23.7 percent," he said.

Indian firms tend not to link increment budgets with inflation directly. "There are two reasons for it. First, there is little consensus on which measure of inflation is the most accurate—is it the CPI, Core CPI, WPI, or household expectations survey? Second, inflation movements can occur due to both supply- and demand-side factors. Increments tend to be higher when demand-side issues drive inflation uptick," Pawan said.

He said that less than 10 percent of Indian firms use macro-economic variables to determine increments as per Deloitte surveys. "Most companies decide their budgets depending on micro factors, such as financial performance and the market salary increase rate to maintain a competitive level of compensation," Pawan said.

Jump in firms looking for talent

Staffing firm Quess Corp's Bhatia said the company had seen a more than 20 percent jump in staffing demand and a higher jump in tech resources year on year. He said the real shift to office would happen once all education institutes return to physical teaching from April 1. "That will take a lot of pressure off from working parents. Many companies are ending WFH incentives by March 31. That, too, will weigh in on the decisions that professionals make for themselves," he said.

TeamLease Services, one of India's largest flexi-staffing firms, has said hiring in e-commerce, banking, retail, IT and telecom sectors has been "red-hot". TeamLease EdTech has predicted that almost 50 percent of Indian companies will hire more this year.

'Double-burden syndrome'

"Some reasons for the great resignation were inadequate health safety measures, desire for flexible work norms, limited career opportunities, and shift to more suitable professions. But we are observing a U-turn. There are concerns over loan repayments, and lack of connectivity with colleagues," Rituparna Chakraborty, co-founder and executive vice-president, TeamLease Services, told CNBC-TV18.

She said there had been an increase in "double-burden syndrome", where employees working from home are juggling between personal and professional roles.

'Off-cycle increments likely if inflation doesn't abate'

Chakraborty also reiterated that though the Indian corporate sector might see higher salary hikes, pay alone may not be enough to retain employees. "Along with hikes and bonuses, a closer focus on career enrichment, upskilling and reskilling, inclusion, adequate health measures, and flexible working policies, are going to aid largely in retention," she said.

So, to stop talent exodus amid a hot job market and high inflation, HR managers will have to redefine talent strategies, even while managing profitability as geopolitical tensions worsen. Like Chaudhary pointed out: “Companies may even opt for mid-year or off-cycle increments if the rising inflation doesn’t abate and is accompanied by high attrition levels.”