Article: Rewards Special: Increased Focus on Fixed & Variable Pay

Compensation & Benefits

Rewards Special: Increased Focus on Fixed & Variable Pay

Sudhir Sohoni, Founder Director, Purple HR Consulting

Purple HR was incorporated in January 2010 in Pune. It is positioned as a company that focuses purely on strategic HR and organization design. We undertake transactional services only if the same is a part of a larger end-to-end project. Purple HR is a total solution provider and we would not want to dilute the positioning by undertaking assignments on a standalone basis. For example, If an organization perceives employee engagement as a problem, we conduct a diagnostic and a survey; thereafter, we explain the findings to the top management and then cascade it down to all the employees in the company and devise an action plan with the help of the people in the organization; partner with the company in implementing the initiatives and finally do a survey to evaluate the shift in engagement. For example, a German company in Pune, which is about 5-6 years old, was facing a problem in understanding how to position their compensation strategy. Local management had a view, the Germany head office had a different view and the employees had yet another view. We got all three views together, conceptualized the strategy and repositioned it. It is the second year in continuation, when they are using the same positioning. We work in the strategic sphere and not in the transactional sphere.

There are four segments in the HR consulting space. One is the strategic management consulting companies, which are high value and project-based. The second segment is the technology consulting companies, which are high value and continuous, and work around HRIS packages, the third is staffing services and SLA-based services. These are continuous low margin and high volume consultancy services. And the fourth is in the area of surveys and pure transactions, which includes recruitment to training, coaching, counseling and resettlement. Purple HR has a play in the strategic space. The size of this consulting market in India is the just about Rs. 600-650 crores but the real market, which exists in India for pure HR consulting is close to Rs. 2,500 crores, as the market has simply not been tapped. There are more than 5,000 listed companies in the BSE, 41,373 companies in the private sector and 8,216 public limited companies. Apart from this, there are almost 1.55 lakh micro, medium and small enterprises that account for 8% of the GDP and employ a crore of people. The market is very large and needs to be tapped.

There are certain fundamental elements that need to be addressed in the rewards space. There needs to be more clarity regarding how the rewards and recognition space is viewed. An organization needs to be clear about the philosophy they have regarding rewards and recognition. They need to decide whether benefits, variable pay and learning opportunities is a part of the rewards that is offered to their employees. Cost to Company (CTC) should ideally not include hygiene factors like valued benefits such as car, insurance, housing, medical benefits, club memberships and credit cards. But there should be a strong focus on fixed pay and variable pay, which can be further characterized as guaranteed cash and variable cash. One needs to have a strong talent management process to provide empirical data, if differentiation has to become a reality. In the absence of a strong talent management process, it is unlikely that a company will have a well thought-of compensation strategy. Differentiation cannot be done without empirical data, which comes from talent management. Yet another issue is that there is no standard definition of employee cost. With so much of outsourcing taking place, sometimes the cost of outsourcing is not included in the employee cost. Logically it should be. There is a need to standardize the components of employee cost.

With regards to trends, more and more companies will focus on CTC, which means all expenditure that is attributable to an employee, will be accounted for as part of the CTC. Companies need to relook at this factor and focus on fixed pay cash and variable pay cash.

Purple HR Consulting does pricing on the basis of work computed in total man days. Whether that is onsite or in the office, the unit cost is the same. Everything else, which includes outstation travel and accommodation, is on actuals and this is not considered a part of the fee.

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Topics: Compensation & Benefits, Strategic HR, #Trends, #HRIndustry, #TotalRewards

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