Primer: Is geopolitics to blame for your missing pay hike?

What hikes can you expect this year?

Consultants who advise companies on pay structures and increments expect hikes—man firms will announce them in June—to be less than what they had estimated as recently as March. While Deloitte had estimated an average pay hike of 8.8%, Aon had predicted 9.2%. Revisions are likely in businesses feeling the strain of geopolitical crises, tariff disputes and cautious client decision-making. Retail inflation eased to a nearly six-year low of 3.16% in April, but that will not soothe nerves. That is because the hikes, when adjusted against inflation, will lead to little additional money in the hands of employees.

What about bonus and variable pay?

This is the tricky part for firms as they have to decide, within a tight budget, how much bonus and variable pay they can disburse. While firms may disburse 70-90% of the variable pay, promotions will certainly be fewer. Some could be mere designation changes without a higher pay slab. Consulting firm Deloitte estimates a 25% drop in the number of promotions in 2025 versus 2024. The bell curve—where performance is plotted on whether employees met, exceeded or did not meet expectations—has become more rigid. Deloitte expects a 25% increase in ‘below meets expectations’ category this year.

Where do you go from here?

A sluggish job market, coupled with over-hiring in recent years, has led some firms to go easy on recruitment. Companies with significant exposure to the US market are wary of policy changes under Trump. This means that even if one is disappointed with the appraisals, the job opportunities are fewer. By extension, the competition for vacant positions will get tougher.

What happens to the high performers?

They will be left disappointed by this appraisal season as the gap between them and others could shrink to one of the lowest levels since the pandemic-impacted season of 2021. While the demand for those skilled in artificial intelligence (AI) will remain high, generalists will find the going tougher. Some companies are offering more employee stock ownership plans and stock appreciation rights to senior executives. Some firms are also paying for management degrees from leading B-schools.

What do we know about layoffs?

Companies are retrenching in small batches and some are reshuffling their decks—mid-level roles are becoming redundant in some companies because of AI. Earlier this month, Mint reported that tech firms such as Zomato, Cars24 and Gupshup have laid off employees over the last quarter. Beyond startups, employees in larger corporations in sectors as diverse as IT, BFSI and automotive remain concerned. In fact, for the first time in five years, the employee base at Tata Motors fell 3% in 2024-25.