Salaries of senior executives in India are projected to increase 8.9% in 2022 from 7.9% in 2021, revealed the findings of the 11th annual Executive Rewards Survey in India by global professional services firm Aon, released on Wednesday.

The median chief executive officer (CEO) compensation is seen reaching Rs 7.05 crore for 2022, says the survey that analysed data across 475 companies from more than 20 industries.

Pay at Risk, which is the sum of variable pay and long-term Incentives (LTI) to total compensation,  for CEOs stands near 60%, while c-level executives including the chief operating officer, chief financial officer, sales head and chief human resources officer following closely behind at 50%.

“Over the last few decades, a large percentage of India Inc has turned to outside talent instead of building from within. However, in the wake of the COVID-19 pandemic, talent is in short supply and the cost of attracting, retaining and engaging leadership talent that grows business is rising rapidly. Not only is the average executive compensation increase highest in five years, but variable pay and equity grants have also risen as companies cannot risk losing key talent at senior levels as this has implications on delivering business performance,” said Nitin Sethi, partner and CEO, India for Human Capital Solutions at Aon.

The annual LTI for CEOs on average is 125% of fixed pay. Most companies use a mix of performance and retention-based grants, with at least 50% of the grant amount linked to performance measures such as shareholder return, profit, revenue and cashflows.

“For determining LTI Quantum, Pay Mix, which is the LTI quantum as a percentage of fixed pay, continues to be the preferred method for India Inc. Progressive organisations are additionally looking at factors such as total target ownership, which is LTI quantum as a percentage of equity, and wealth creation,” said Pritish Gandhi, director and practice leader, India for the Executive Compensation and Governance Practice at Aon.

"Potential, which is LTI Quantum percentage to target desired wealth creation at exercise, when determining LTI grants to compete effectively with new age start-ups. Companies must use a mix of performance and retention-based grants to retain their top executives," he added.