Article: Rewarding employees with an eye on performance

Compensation & Benefits

Rewarding employees with an eye on performance

A surging economy will result in jobs chasing candidates, and HiPos being rewarded above the average
Rewarding employees with an eye on performance

This year looks just as promising as the past for the IT sector with an over 11 per cent increase in average salary numbers


India is looking at a good year. With the change in the political scene, the country has become a favorable destination for investment and the economic growth rate is predicted to cross the 5 per cent mark. This prospective investment will not only promote growth in most sectors in India but will also drive up salary expectations across the board. To manage and make the most of this expected growth, companies will need to work on innovative performance-based reward strategies to best accommodate employee expectations, with an eye on the bottom line.

Talent struggle and rising salary

Taking a closer look at the potential talent pool across the country, a striking number arises looking at the India Skills Report for 2014 by Wheebox, which states that only 10 per cent of MBA graduates and 17 per cent of engineering graduates in the country are employable. With such low employability, companies across sectors will be led into a tussle for the same talent pool.

There will be more jobs chasing the right candidates as opposed to companies dealing with job applications. Companies will have to focus on their messaging in a manner that appeals to individuals, with real-time recognition and swifter rewards. Candidates will not make immediate choices and will want a sense of fulfillment, learning opportunities and good pay combined. With such expectations, prospective employees will be spoilt for choice. Companies, regrettably, not so much.

With the mismatch in demand and supply, salaries this year will further stretch upwards to catch the right candidates. Looking at the salary trend in India, the salary rate increase is higher than the inflation rates. This means that real wages across the country are rising. With fewer candidates and increasing merit in these pockets, this year will see continued double-digit increases in salaries across all sectors. Leading in this trend for increased hikes forecast in the range of 12-13 per cent, will be life sciences and the consumer industry. These industries have seen a steady upward trend and are looking to continue on the same tangent. Life sciences has been a fairly recession-proof industry. However, the latter has seen some inflationary pressures in the last year. This will be a catch-up year for the consumer industry.

Information Technology was the highest paying sector in the last year with an average gross salary of Rs. 341.8 per hour, according to the Monster Salary Index (MSI). This year looks just as promising for the sector with an over 11 per cent increase in average salary numbers. Industries with large employee bases like High Tech, shared services or the BPO industry will not be looking to give significant hikes. Rather, their numbers might be the lowest in 2015, forecast at slightly upwards of 10 per cent. Under the financial services sector, insurance is still struggling to make money. However, asset management has a lot of scope and is likely to pay close to the industry average.

The manufacturing sector found fresh impetus with the Make in India campaign in the last year. This positive investment sentiment for Indian companies is even more evident with Narendra Modi’s visits to Japan, US, Myanmar, Australia and other countries. With international economic support, all sub-industries under the manufacturing sector are looking to expand in this fiscal with an expected increase of 10 lakh jobs. With such great numbers and the positive sentiment of the global market for investing in these companies, the manufacturing sector is looking at an upward revision of close to 11 per cent in this year.

Across sectors, companies will turn to performance-based measures to dole out justified monetary benefits which will also add to their bottom line. This will spell great news for HiPos who can expect a salary hike of 15-16 per cent in 2015. A differed bonus will be a great way to engage and show confidence in high-performing employees as well. Also, with companies looking to increase their global footprint, HiPos will be offered mobility assignments which will act as great performance incentives and add to the organization’s expansion efforts.

Niche skills will gain prominence, and these high demand profiles will be rewarded over market-aligned levels, even if it means companies have to deviate from their standard pay and reward levels. Business expansion will take precedence and sales and R&D will be in the highest demand across sectors. In technology and High Tech, specialist skills like cloud and analytics with drive salary numbers upwards.

Adding rewards to compensation

With increasing salary numbers, there is only as much that a company can promise monetarily. In most sectors this year, firms are not looking to change the basic compensation structure. However, there will be more flexibility in terms of base salary and fixed allowances as the multi-generational workforce will be looking at different rewards to augment their compensation. A major focus by companies in 2015 will be on work-life balance, health & wellness and recognition programs for employees.

ESOPs took a beating due to the poor and volatile market conditions in the last few years. But with a multitude of young e-commerce companies hiring big numbers in this year, stock options will regain popularity with the younger generation. Also, smaller incentives like reimbursement coupons, free or subsidized food options will add to the charm of smaller companies. Technical skill building will be another way for cash-strapped companies to offer better employability and growth opportunities to their current and future employees.

Overall, flexible work hours will rule the roost as the top incentive for retention and leave policies will see a revision to match employee expectations. Long-term incentives will make a return with a lot of companies offering differed bonuses and stock option programs as well.

Have we arrived at the destination?

The conversation shifted from the traditional domain of guaranteed cash and incentives to incorporate a higher focus on intangible rewards, benefits and work-life balance in the last few years. This will further take a turn and will now be about real-time engagement and swift rewards. Compensation will form the hygiene factor and emotional engagement will take precedence. More and more companies will clearly define business success parameters and link employee rewards elements — including fixed salary increments and long/short-term incentives — to the achievement of these business results.

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Topics: Compensation & Benefits, #IHOWeek

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