Bogged down by rising prices? Get ready for the worst. Your employer is busy planning to trim your next increment and performance bonus. Salary increases and perks across sectors, such as automobiles, banking, IT, ITeS and retail — which have taken the brunt of global slowdown and domestic inflation — are likely to be hit the hardest. “When economic circumstances change, the assumptions used for performance budgeting also change. This is when companies revisit their budgets,” says Gangapriya Chakraverti, business leader, Information Product Solutions at Mercer India, an HR consultancy firm which recently concluded a survey on the impact of inflation and fuel prices on salary revisions. The yet-to-be-released survey has found that a majority of companies expect salary revisions to be impacted in 2009 with performance being an important determinant.

Average salaries yearon-year had grown 10% in 2001 and 14.3% in 2007. Experts say that this year, average rate of increase in salaries across sectors will slow down. And as the reality of penny-pinching consumers and rising costs sinks in, Indian corporates are also responding by tightening the belt around the one gift (read bonus) that employees look forward to every twelve or six months. What’s more? Next year, the variable component in your salary could go up. The country’s biggest retailer Pantaloon Retail, for instance, is in the process of restructuring its compensation structure in favour of payouts linked to business performance. Sources told ET that executives at senior levels could see their variable pay component go up from 20% to up to 30%, while at junior levels the figure could be revised from the current 15-20 % to up to 25%.

When asked, Pantaloon chief people officer Sanjay Jog said: “Things will slow down. We treat this as a great opportunity to re-deploy people and leverage our costs at zonal and headquarters level across more stores.” This would however have little impact on frontline store hiring, which comprises 80% of manpower intake for the retailer.

Signs of manpower rationalisation have started showing in the retail banking space. The bigger private sector bank, ICICI Bank, has pruned bonuses even at senior levels last year. This year, it has announced a further reduction in bonuses. And the country’s biggest carmaker, Maruti Suzuki, has already done some amount of rationalisation. Maruti pays bonuses twice a year, once around Diwali and then in May. So far, the company has only made small changes to its compensation design, such as going from a 100% fixed salary to a 15% variable component at junior levels, says HR head SY Siddiqui.

“The effects on bonuses will be more in corporate and investment banking where the dip could be as much as 40-50 % for the latter,” says Atul Vohra, managing partner, Transearch , an executive search firm. “Salaries will be more realistic this year while bonus is not reflected yet,” says Pankaj Karna, partner, M&A at Grant Thornton India.