Article: What to expect in Total Rewards this year

Compensation & Benefits

What to expect in Total Rewards this year

The outlook is positive across the board in terms of rewards, but for hiring, a caveat is in order
What to expect in Total Rewards this year

Industries like FMCG, retail and chemicals will continue to roll out annual short-term variable pay at high figures


It’s that time of the year again, when the rewards space takes centrestage. This is when every member of India Inc., across levels, may have very similar questions flooding their minds: What will the salary hike figure be? Which sectors will grow? Will I be rewarded? Will my exceptional performance set me apart from the rest? Based on Hay Group’s extensive research, we hope to answer a few of these.

What can the general market expect? As per our research, the pay raise in 2015 for India will remain in double digits and the general market can expect a pay increase of 11.3 per cent across job roles this year. The figure is only slightly higher than the actual average salary increase of 10.9 per cent across India Inc. in 2014.

Which sectors will grow? FMCG and chemicals are expected to lead the marketwith double digit figures of 11.9 per cent and 12.3 per cent. In 2015, there are specific sectors that will continue to grow or remain stable and others which will hope that the government translates its many promises into concrete measures. While the FMCG sector has been stable and will continue to remain so, e-commerce and logistics will also grow manifold. What’s important to note here is that the growth of e-commerce and logistics is based on spreading their reach and doesn’t involve a dependence on the government. This is why one can predict that the growth dimensions of these sectors are unlimited at this point in time.

Another sector usually known for doling out the highest salaries may be a little more cautious this year. With the global scenario evolving, the oil and gas industry and related sectors like EPC may go softer on earlier projections of high variable pay and increments.

Will my exceptional performance be rewarded? We’ve witnessed an overarching focus on performance in recent years. You can expect this to continue. With the payouts widely influenced by individual as well as company performance, industries like FMCG, retail and chemicals will continue to roll out annual short-term variable pay at high figures (14.5 per cent, 14 per cent and 14.4 per cent respectively). Other industries like industrial goods and transportation too will be pushing the boundaries (11.8 per cent and 9.1 per cent respectively).

What about the top executives? The leaders of India Inc. can expect an increase of 10.2 per cent in 2015, up from 10 per cent last year. The CEO’s top team too can expect a double-digit pay rise of 10.5 per cent. But, what’s significant here is that more organizations are now tending towards cash-based compensation for their top executives and away from a benefits-heavy structure. However, organizations are using benefits and perks as ways of recognizing their top performers. The idea is to utilize these benefits to drive role model behaviors in the organization.

At the same time, incentive plans are gaining prominence as key elements of top executive compensation. Another key trend is that the difference between MD/CEO salaries and other top executives’ salaries has been reducing over the years, implying that the entire top team is viewed as impacting the company’s performance.

Performance linkage gains importance. There is also no doubt that performance linkage is steadily gaining importance, with performance-linked incentive plans (short and long-term incentives) becoming key elements of top executive compensation. There has been a steady increase across industry sectors in the prevalence as well as percentage of incentives for MD/CEO and other senior executives. This implies that there is a direct alignment between the goals of the company and the compensation plan. Also, the top executive compensation is commensurate with the contribution or impact of the role.

With most reports and research on the 2015 job scenario suggesting that the promised ‘acche din’ are in store, the outlook is definitely positive. However, a word of caution. Employers may have switched to hiring mode and put detailed plans in place, but so far we haven’t seen these plans translate on the ground.

Businesses must adopt a strategic approach to ensure that they are on the winning side of the talent wars. Driving productivity and retention is based on a combination of both rewarding your employees and keeping them engaged and enabled. We hope that the much talked-about positive outlook will transform into reality and ensure that India Inc. grows manifold and manages to hold on to valuable talent.

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Topics: Compensation & Benefits, #TotalRewards, #Trends

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