There are different policies being followed by organizations in terms of fixed and variable pay. Most organizations follow a basis of giving fixed pay bonus, variable pay and long term pay; some companies follow very high fixed pay, no bonus and selected long term pay, whereas some organizations choose to give sharper variable pay. Most insurance companies give, especially in the sales management area, fixed pay and performance incentives. Performance incentives are linked to individual performance and not company performance. We might see a shift across a period of time, between the individual and company performance or a combination of both.

At ICICI Prudential, we always follow a policy of performance bonus and the challenge is to build a quality organization and it is upon the employees to ask themselves if they want internal competition or a team built organization. An organization might fail in spite of great work done by an employee. Therefore, for us, organizational performance comes first and then individual performance.

In terms of fixed and variable pay, for most insurance companies, the wage count is around 30-40 percent of the total operating expense; that being such a big element of total cost, there will be significant pressure on HR and the organization to derive maximum value from this. Most operating companies have not even broken even. If the wage cost goes high, that would definitely impact profitability. Organizations will have to follow a balanced strategy – fixed pay should be attractive enough to acquire talent but retention will come only as a result of the long term pay. We have moved to deferred cash and long term cash. There will be pressure on total wage cost, a movement towards balancing between fixed pay, long term pay and performance variable. The higher the level, the more long term pay will be preferred, especially for the senior management. As organizations will not be able to reduce or not give increments, people will have to maximize productivity.

Non-cash components are emerging components. These do not cost a lot of money, but there are benefits attached to these components. Most organizations are supporting medical benefits for employees and their families. Medical premiums are high and are rising at 20 percent year on year. That is a reason why companies are looking for innovative designs in terms of ‘co-pay’ options, where the employee pays one part and the company pays the other part. HR policies are likely to become more benefit driven and will acknowledge the relevance of flexibility like sabbaticals, continuing education, etc. Organizations will have to think about creating propositions that enable longer retention. One change we see would be in terms of more relaxed maternity norms for women employees. There is a lot of realization that one is missing a large talent pool if there is no flexibility in terms of longer maternity leaves, marriage leaves, etc.

We use two kinds of vendors to whom we have outsourced our services – payroll processing and compensation consultants.

The sample size of companies is so small that it is very difficult to do benchmarking. The Indian market still does not have the depth in terms of shared number of data points. Most multinationals worry about external equity, benchmarking, followed by affordability and then internal equity. Indian organizations tend to have less sharp differences, the proportion of rewards between top and average performance is skewed. Traditional Indian organizations do not worry about external equity usually, but multinationals do. Startups do not care about internal parity issues as well.

Performance management along with rewards and recognition has to be fair. One cannot bring in rewards without performance and talent management. The challenge is the perception of fairness. At ICICI Prudential, we make sure that managerial access and bias is minimized to the maximum extent. It is all about governance, processes and compensation and if that is not managed in a broad manner, it would become a problem.