Article: One size DOES NOT fit all

Performance Management

One size DOES NOT fit all

With changing demographics, companies cannot now afford to create a standardized template for Rewards & Recognition
One size DOES NOT fit all

Companies are making a conscious effort to move from a ‘One size fits all’ program to personalized rewards strategies through a complete employee value proposition


Like the last financial year, the median salary increase will be between 10 % and 11 %


A 20-something force of youngsters has invaded the workspace, propelled by India’s changing demographic and suddenly the monochromatic view of the workplace has become much more colourful like a kaleidoscope. The changing demographics have always presented a huge challenge to organizations, irrespective of their size or industry, especially in the Rewards and Recognition space. Today, R&R is like buying birthday presents for the son, father and grandfather—Each generation has its own way of defining the experience of getting rewards. That is what the HR community is grappling with these days. It has dawned on them that the strategy of “One size fits all” does not work anymore.

When looking at compensation, the market until last year was not very conducive and salaries saw restrictive growth. The average salary increase is projected at 11 per cent, according to a Mercer survey (in which more than 700 companies participated) released in February 2014. However, the actual increase was 10.6 per cent. Likewise, sales and performance incentives in 2014 fell way short of the targets that organizations had expected to pay out based on 2013 performance. Business performance in many organizations was below expectation, impacting their ability to pay as forecasted. However, 2014 saw organizations struggle even more with balancing compensation costs and the continuing challenge of attracting and retaining the best employees. However, organizations that came out on top innovated or made the most of a holistic rewards proposition that went beyond cash compensation.

Reward trends in 2014

Last year, the rewards segment moved away from the traditional domain of guaranteed cash and incentives to intangible rewards, benefits and work-life balance. That trend has now caught on traction from companies across various sectors making a conscious effort to move from a ‘One size fits all’ program to personalized rewards strategies through a complete employee value proposition (EVP).

Mayank Kumar, Consultant, Hay Group India says, “Companies are moving from a ‘One size fits all’ to ‘Bespoke rewards strategies’. They are creating total rewards strategies aligned to employee needs across various segments and demographics and are experimenting more than ever before. This experimentation was further driven by the fact that a not-so-great financial performance in the last couple of years had restricted the size of increment war-chest available to HR.”

Business Linkage: One of the biggest changes in the rewards space is the morphing role of performance. In the last few years, most companies have established stronger linkages of rewards to business results. More companies are clearly defining the business success parameters and linking employee rewards elements be it fixed salary increments or long/short term incentives to the achievement of these business results. Even start-ups offering competitive fixed salaries present significant upside through equity linked long term incentives.

Mix advantages: Across different levels in the workforce, the spectrum of R&R is now varying. With a mix of millennials in the workforce at the entry levels, the focus is more on providing better work and growth opportunities. Companies are trying to provide international stints/deputations, fast track promotions etc. to attract and retain talent. At the mid-levels, the mix includes paid vacations, family health policies, sabbaticals policies, with some companies offering sabbaticals of up to six months at half the pay. At the senior levels, rewards are considerably bigger with companies offering housing, club memberships etc. in addition to long-term incentives.

Health & Wellness: Health and wellness requires a special mention when we look at last year. From being a part of mix advantages, health and wellness is evolving into a whole new gamut of rewards. Companies are expanding their wellness offering to include incentives for individuals who are focusing on their health with gym memberships, wearable devices etc.

Niche Skills: With niche skills gaining ground, hot skills are being rewarded at market aligned levels, even if it means that the company has to deviate from its standard pay and reward levels. There have been instances of top-tier management graduates being hired for niche roles in traditional industries like manufacturing, at significantly higher levels of salaries and rewards compared to the generic pay scales/levels.

HiPo performers: High or rather ‘Hyper-performers’ are being recognized, empowered and rewarded more than ever. There is a trend of some progressive companies moving away from the traditional ‘bell curve’ in their performance management, and focusing more on identifying, nurturing and rewarding their best performers.

Long term rewards: Within long term incentives, ESOPs have taken a beating due to the poor and volatile market conditions in the last few years for established companies. However, cash strapped start-ups still offer a significant part of the salary package as ESOPs. For other companies, LTI schemes like Performance Units have gained traction.

What does 2015 hold in store?

With so many changes in the past year, the rewards space looks more complex for an HR professional, but very simplified for individual employees. A number of HR professionals also believe that introducing an Employee Value Proposition (EVP) at the hiring stage could make the R&R space very attractive for prospective employees as well. So what will the New Year hold for the HR industry when we look at rewards?

Compensation: According to Amer Haleem, Business Manager, Productized Services, Hay Group India, the pay raise in 2015 for India will remain in double digits. The general market can expect the median salary increase to stay between 10 per cent and 11 per cent like the last financial year. In reference to specific sectors, the Chemical industry is expected to lead the market, followed by FMCG and Oil & Gas industry. The salary increase would be lower at higher levels, with maximum increment at clerical levels, followed by junior management. Also, some industries like Oil & Gas, Retail, FMCG and Media have been variable pay friendly. In 2015, it is expected that some other industries like manufacturing will actively push the boundaries when it comes to variable pay.

Political influence: With the installation of the new government, speedy economic revival has led to positive expectations in the employment space. The positive outlook has not yet translated into hiring on the ground but could show significant changes in the coming months.

No one size fits all: The trend of companies moving away from a ‘One size fits all’ to ‘Bespoke rewards strategies’ will continue in 2015. Over the past three years, we’ve witnessed how the difference between the rewards offered to average employees vis-a-vis a top performer has been growing sharper. This trend will make its way to the next year. For example, some companies offer their top performers a 16-18 per cent hike compared to a 10 per cent hike for an average performer.

Social recognition: Social recognition is becoming the order of the day and is rapidly gaining prominence with companies working to include a complete online system. Girish Khare, Consultant-Marketing at Grass Roots India said, “Social recognition creates a transparent organization. One that allows top management to get a sense of how the organization is working, how people react to situations and peer-to-peer collaboration or the lack of it. But most importantly, it helps create a conducive environment, allowing for both high performers and mediocre to co-exist and operate at their optimum within their comfort zones.”

Health & Wellness: In the coming year, wellness could move to be a part of the compensation package. With increasing reimbursements for cycling to office, car-pooling, gym memberships etc. wellness is becoming a significant part of rewards.

Speaking to Anandorup Ghosh, Dir, Talent & Rewards, Aon Hewitt, India, he says, “ The focus on lifestyle benefits like flexi-working hours, health and wellness has gone up and will receive more attention in 2015 as well.”

A reward can have different meanings for different people and that change in perception has reached the HR fraternity. It is safe to say that the spectrum is no longer monochromatic.

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Topics: Performance Management, #ChangeManagement, #TotalRewards

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