Article: Designing customised rewards on the basis of demography

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Designing customised rewards on the basis of demography

Demography, as also customisation of rewards plays a vital role in an organisation's ability to attract and retain talents
Designing customised rewards on the basis of demography
 

Gender is a key aspect of the demography. While 48.4% of our population is women only 6% of them are part of the organised workforce

 

As more and more of our youth join the organised sector, they will bring enormous diversity to the workplace

 

It is that time of the year when the energies and attention of HR professionals are focused on decisions relating to salary increases, bonuses and offers on the campuses. It is therefore just the right time to reflect on a crucial aspect of remuneration, namely demographics.

Demography is defined as the study of populations. In the context of remuneration, it has two aspects – external or societal and internal. Externally, it refers to the impact that changes in population in a society have on the remuneration practices employed by organisations in that society. Internally, it refers to the extent to which the aspirations of different segments of an organisation’s workforce impinge on the organisation’s remuneration practices on the one hand and the extent to which an organisation’s remuneration practices can be attuned to attract the segments which the organisation feels it needs on the other. Demography plays a crucial role in an organisation’s ability to attract and retain talent.
Societal demography

We are an ancient civilisation but a young country. Young not only because our post-colonial history is a mere 63 years old but because 48% of our population is below 25 years of age1. Economists refer to this as demographic dividend, which few countries enjoy today. However, depressingly, 23.6% of our youth is illiterate2. And of those that have had the benefit of a tertiary education, only few are employable. We face the enormous challenge of providing access to universal, good quality education to our youth. The pace and extent of our response to this challenge will determine how well or poorly and how soon we will reap the demographic dividend.

A key aspect of demography is gender. While 48.4% o our population consists of women3, only 6% of them are part of our organised workforce4. Social factors and attitudes play an important role in women joining and staying in the workforce. Many of them drop off after marriage to raise a family. Given our talent shortages, we need to innovate around HR and remuneration practices that would enable us to benefit from the skills that women bring to work.

Thanks to advances in medicine that we are now living longer than before. The average life span of an Indian rose from 59.7 in 1995 to 64.7 in 20075. Again, given our talent shortages, it seems wasteful for us to pension off capable, senior and experienced employees. While physical and some mental capabilities tend to decline with age, older employees provide corporate memory, the richness of their experience and wisdom that is hard to teach. They are also a source of stability and reassurance to a young workforce whom they can coach and mentor. Organisations facing talent shortages would do worse than review their policies and practices, not least those related to remuneration, to tap into this growing talent pool.

I come to yet another aspect of our demography: the differently-abled. Too many organisations require the same level of fitness and physical ability of all their employees regardless of the different roles the employees would play. Thus there are standard fitness tests that candidates must pass in order to qualify. I know of candidates who are colour-blind being rejected for roles that did not require superior abilities at colour recognition!

As more and more of our youth join the organised sector, they will bring enormous diversity to the workplace. This will present opportunities (the advantages of diversity are well-known) but pose challenges as well. For too long have managements represented the urban, engineer-MBA, CA paradigm. Given that our elite professional educational institutions are too few in number to cater to the requirements of our burgeoning population, it is inevitable that this paradigm will change. People with other backgrounds will tend to bring a different set of experiences and values and will also likely view issues and problems with different optics. Finally, as Indian organisations extend their global reach, they will have to pay attention to attracting and retaining a global workforce with implications for rewards, organisational culture and talent management.

Internal demography

An organisation’s internal demographic refers to the constitution and evolution of its workforce and the changes to which it is likely to be subject to in the future. Aspects of internal demography include education, age, gender, language, skill, nationality and performance. In our context, it would also include sections of the workforce from marginalised communities, castes and regions.

Organisations do tend to differentiate on the basis of education. Higher scholastic achievements and qualifications from better-regarded institutions do tend to be rewarded higher at entry level. Rightly, such differentiation ceases to have merit thereafter and performance takes over. Age and gender are well understood but inadequately addressed through HR and remuneration policies. Remuneration policies in old-era organisations tend to be more benefits-oriented, rather than cash-oriented. For instance, a typical pay structure would consist of employer provided housing, retirement and healthcare contributions. Such a structure would find favour with older employees but will not attract younger ones who typically want larger amounts of cash on hand. Similarly, many organisations have one-size-fits-all pay policies and structures that are not aligned to the needs of women.

Unique skills including language must be recognised and rewarded. For instance, a company that seeks to expand its business in Japan must recognise and reward Japanese language skills. Employers have invested significant effort and money in creating and updating their skills inventory but the extent to which they reward differentiated skills is a moot point.
Cost and quality of living vary from country to country. Therefore companies with a global workforce have had to calibrate their remuneration policies to take account of these differentials. Problems arise however when employees from one country are asked to relocate to another country. Are such employees to be paid at par with the employees of the country to which they are being asked to move? Or should they continue to be paid their home country salaries? Tax considerations and job opportunities for the spouse who may have to give up his or her career in the home country also play an important role in such decisions.

Demography and Rewards

It is important that employers craft policies and practices that are sensitive to societal and workforce demographics. This calls for a high degree of innovation and an inclusive mindset. In the matter of remuneration, issues for consideration include:

• Flexible pay structures that cater to the needs of a diverse workforce
• Restructuring work and pay to make it possible for retiring employees to work for longer
• Restructuring career paths and HR policies to make it attractive to retain women for longer and provide them with opportunities to reach the highest positions in the organisation
• Customised pay and careers for the differently-abled
• Flexible work and pay practices to allow employees to work at their own pace and from home
• Special efforts (through training and on-boarding) to include employees from disadvantaged sections in the workforce
• Pay and rewards that allow employees to alter the structure of their pay depending on their needs at a given point in time (like sabbaticals, healthcare and pension contributions, flexible work hours, et al)

As customisation comes at a cost, employers must balance it against considerations of efficiency and administrative ease, and must communicate their policies and their rationale and benefits to the wider world especially to the talent segments they wish to attract and retain.

The difficulty of implementing customised, flexible reward programs in our country is the expectation from employees to have the cake and eat it too! How often have we heard from employees that they want work-life balance but that they should be paid and treated just the same as employees who are prepared to sacrifice work-life balance to further their careers? This leads to inequity and unfairness. Employees must be educated to understand trade-offs and to accept the consequences of the choices they make. They cannot and ought not to expect the best of too many worlds.

1. Source: US Census Bureau, Internet Database, December 2007 (latest available data).
2. Source: 2000-2004 data from the Education for All Global Monitoring Report, UNESCO (2006).
3. Source: CIA World Factbook
4. Source: A press release from CII, 2005
5. Source: World Bank, World Development Indicators

R. Sankar is an Executive Director at PricewaterhouseCoopers and can be contacted at sankar.ramamurthy@in.pwc.com

Topics: #TotalRewards, Compensation & Benefits, Diversity

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