Business Today

New carrots for old

Manasi Mithel        Print Edition: May 13, 2012

Around Christmas last year, Anto Roy, Technical Head at Microsoft India's Global Technical Support Centre in Bangalore, happened to help out a junior colleague. A valued customer, who paid Microsoft millions of dollars every year for its support technology, had called with a technical problem, which the junior, new to the job, was having troubling handling. Roy stepped in and solved the problem. "I only did my job, which is to help the 10 to 12 support engineers working under me," says Roy. But just for that he was given the company's 'Star Lead' award at a grand ceremony held at an outdoor location, in the presence of all his peers and superiors.

With the past financial year having been one of sluggish growth and shrinking bottom lines, companies know they will not be able to reward even their best employees with the kind of increments they expect. As a result, with appraisal season in full swing, human resource departments have been forced to think of other ways to retain employee loyalty than providing a fatter pay cheque. "Given that budgets are limited, companies will want to reward their top performers more, while poor performers may not get any increases at all," says E. Balaji, Managing Director and CEO of human resources firm Ma Foi Randstad.

  • Companies are trying to keep their wage bills under control by increasing the variable compensation paid to employees
  • Variable compensation is a portion of an employee's salary linked to his or her performance, which can be withheld or paid partially if the company deems it fit
  • Percentage of salary earmarked as 'variable compensation' at different levels

Senior: 20-25
Mid-level: 13-16
Junior: 8-10

Source: Ma Foi Randstad report

Thus the emphasis on awards of the kind Roy received, on appreciative gestures that do not call for excessive expenditure. Naturally HR personnel prefer to put it differently. "We are more concerned with how well a frontline engineer meets customer requirements than with the time taken to deliver such requests or the number of customers satisfied," says Binu Philip, Microsoft Director HR-India.

But the real reasons for the trend are clear. "This year, non-monetary incentives will increase," says Ronesh Puri, Managing Director of HR company Executive Access. "There will be more employee recognition, more rewards and employee engagement."

Further, more companies are likely to adopt the practice of providing variable pay, the variable component linked to performance. In India, the variable component is generally 15 to 25 per cent of the fixed salary, while in the West, it can be as high as 70 to 85 per cent. The Ma Foi report expects variable compensation this year to be in the range of 20 to 25 per cent for senior management, 13 to 16 per cent for middle management and eight to 10 per cent for junior management.

Generally, employees in India prefer a large fixed component in their salaries, says Ma Foi's Balaji, as it ensures financial stability. Of course, this is not always the case. "An individual who is willing to take risks at work will prefer a large variable component in his salary," he says.

Executive Access's Puri says that in the last two years, the variable payout that companies offer their employees has increased and will continue to do so in coming years. While earlier only senior employees had their salary packages thus segmented, lately even those discharging lower functions are being offered similar deals.

To forestall discontent, companies are also tweaking the variable component concept. "Normally the variable payout to employees happens at the end of the year but this year it is happening at the end of each quarter or at the end of six months," says Muninder Anand, Director, Information Product Solutions, at global HR solutions firm, Mercer. Companies are also ensuring a higher level of transparency by sharing the benchmarking process by which variable pay is decided with their employees.

"Our company's performance is regularly shared with employees through management road shows or open house forums," says Ashok Ramchandran, HR Director at Vodafone India. "Incentives and bonus plan criteria are very transparent. Thus employees are able to keep a check on what the company expects of them. " No doubt the salary level is not the only factor responsible for a company's appeal, or its high retention. The benefits it provides also matter. A recent survey by Mercer showed 62 per cent of employees join firms on the basis of the benefits given.

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