Professional Documents
Culture Documents
CONTENTS
EXECUTIVE SUMMARY............................................................................................................. 3 RESEARCH METHODOLOGY ................................................................................................... 4 EMERGING CHALLENGES FOR HR LEADERS.................................................................... 9 COMPENSATION AND BENEFIT IN PERSPECTIVE ......................................................... 12 COMPENSATION STRUCTURES TODAY.............................................................................. 23 PERCEPTION OF CURRENT COMPENSATION & BENEFIT POLICIES........................ 28 EMERGING TRENDS IN COMPENENSATION & BENEFITS ........................................... 33 ANNEXURE................................................................................................................................. 37
Section 1
EXECUTIVE SUMMARY This is the second year of publication of the annual Gallup-Businessworld Compensation and Benefit study. The aim of this study, besides identifying pay-scales across levels for select industry sectors, is also to understand how aspirations and expectations of white-collar employees are shaping up through the years. The study has therefore been conducted in two separate legs- the Employee Leg and the HR Head leg, both of which involved both qualitative and quantitative research. Gallup studied Salary packages across sectors. The IT sector leads by miles when it comes to salary packages offered at the Entry and Junior levels. It is at the Middle level that the churn really happens. While IT by far continues to lead when it comes to salary packages, Telecom comes a close second. At the Senior levels, it is Telecom which offers the highest salaries with IT coming next. Despite talk about the emerging retail sector, the industry is the lowest pay-master among all sectors studied. It is BPO however, which offers the biggest salary jump upon promotion fromJunior to Middle and Middle to Senior Management. Increments upon promotion are comparatively small in the Manufacturing Sector. The good news is that HR decision-makers of leading organizations have their finger very much on the pulse of employee opinion when it comes to factors, which attract talent to an organization. Compensation is critical but what is more important is Career Growth and learning Opportunities. Corporate Image goes far beyond an attractive package. HR Managers are aware of the need to package the organization as a desirable place to work. As an HR Leader put itCorporate Image is not just about how we come across in our campus placements or if we pay top dollar. It is also about what an employee goes back and tells his spouse about his day at work. It is our effort that no employee ever needs to say oh lets not talk about work please when he is with friends Compensation is more of a hygiene factor but an important one. This is something that both, employees and HR Managers are in agreement with. Overall, employees were appreciative of the trend towards performance -based pay, much more than HR Managers gave them credit for. They, however, felt there was scope to innovate around compensation structuring especially given the changing social (increasing number of women in the workforce,) and economic conditions (Market yielding higher returns than PF) in the country. Employees also wanted more flexibility and more say in how their salaries were structured. Contrary to HR Manager opinion, they did not consider Car schemes more important than retirals. They viewed ESOPs with cautious optimism, seeing ESOPs as attractive, yet preferring a spot payment to an equal amount in ESOPs. Very much like last year, Infosys, the Tata Group and Wipro were perceived to have the best compensation and benefits policies.
3
Section 2
RESEARCH METHODOLOGY
Context of the Study:
The Gallup-Businessworld Compensation Survey aimed to benchmark current practices in the area of Compensation and Benefits and understand how Organizations are effectively using Compensation and Benefits as a vehicle for enhancing productivity and organizational excellence.
Objectives:
The broad objectives of the study were To understand emerging trends in the field of compensation and benefits. To understand the top management view of the evolving expectations of employees and the effectiveness of existing practices in place in terms of boosting employee engagement and enhancing organizational effectiveness. To identify best practices in the area of compensation structuring and employee engagement measures. To understand the top management view of linkage of compensation and benefit practices with business drivers. To put compensation and benefits in perspective with other tools at the disposal of an organization and study emerging trends. To benchmark current practices in compensation and benefits across industries, levels and functions within organizations. To understand changing expectations on compensation and benefits from an employees perspective
Research Design:
In order to present an unbiased perspective of Compensation & Benefit practices the study was designed to include both employers and employees. HR managers/ Compensation managers were considered representatives of the employer viewpoint. Research was conducted in two phases -Qualitative and Quantitative. The qualitative phase was largely exploratory involving Focus Group Discussions, In-depth one on one and telephonic interviews. The purpose of this phase was to identify potential trends and provide inputs towards designing an instrument for the quantitative phase. The quantitative phase involved administering semi-structured questionnaires. The objective was to validate inputs gleaned from qualitative research and address the survey objectives stated above.
To get a larger perspective Gallup and Businessworld identified certain Industry sectors as focus areas. o o o o o o o o o Manufacturing, Pharmaceuticals, Telecom, Financial sector (Bank/Insurance), IT, BPO/ITES FMCG Retail Consumer Durables
Within each sector, organizations which satisfied all of the below mentioned criteria were identified as targets for the study on the basis of the following Broad Guidelines o Reputation as an employer of choice o Reputation for having groundbreaking people practices o Profitability and position in the market
Sampling Plan:
The sample distribution was as follows.
Mfg. Phrama Telecom FMCG Fin. IT BPO Retail Consumer Durables Total
Qualitative Phase
FGDs (Employees) Depth Interviews (Employees) Depth Interviews (HR Heads) Semistructured interviews (Employees) Semistructured interviews (HR Heads) 1 4 5 5 5 5 1 5 1 5 5 5 3 44
18
Quantitative Phase
71 87 80 77 82 88 78 84 84 731
46
As is described above in each industry sector, across organizations, HR managers and Employees were met. The employee population being large and non-homogenous, the research was designed to ensure adequate representation of functions* and levels* across sectors.
NOTE:
Functions and levels were defined as Functions: Front line = Sales and Service Line = Production/Manufacturing Support = HR, Finance and Administration Levels: Entry level Junior Management, Middle Management, Top Management Majority of the organizations selected for survey featured amongst the top 10% paymasters in their respective industries; 87% were amongst the top 20% (as per the perception of the employees covered).
Manufacturing
Tata Steel Tata Motors Maruti Udyog Limited, Eicher Motors, Hero Honda, M&M
Pharma
Ranbaxy Wockhardt, Pfizer, Dr.Reddy's laboratories limited, Biocon, Eli Lily
Telecom
Avaya Global Connect, VSNL Bharti, Hutchinson Telecom East Limited, Idea Cellular,
Financial
Bajaj Allianz, Kotak Mahindra ICICI, Birla Sunlife, ABN AMRO, Aviva, Standard Chartered
IT
Flextronics, Wipro Infosys, TCS, Satyam, Wipro Technologies, HCL, STM
BPO/ITES
Genpact, IBM Daksh Accenture, Sutherland, HCL BPO, Convergys India Services Private Limited
Employees contacted for the study belonged to leading organizations in the above- specified sectors.
NOTE: 1] All Employees who answered the survey had spent more than 3 months in their respective organizations. Over three fourth of the respondents had previous work experience, majority of them in the IT and Financial sector. 2] 35% of the employees were Graduates, 23% Post-Graduates, 21% were MBAs and 10% had professional qualifications like Engineering/Medicine.
Section 3
63%
17%
20% 0%
Most attractive destination for the best managerial talent worldwide Home to the best managerial talent worldwide Struggle to meet its Need to look to other countries to meet its demand for managerial talent demand for managerial talent
4%
13%
HR Heads seem to be extremely bullish on India as far as the future outlook of the Talent pool is concerned. A sizeable section (13%) however are worried about the Brain Drain phenomenon. Cross-cultural integration With Indian companies rapidly expanding footprint across the globe, cross cultural integration will be among the biggest challenges that HR Leaders face in the times to come. Global integration is no more a growth dimension, it is a survival imperative. We need to go where the markets are, where the opportunities are, where the efficiencies are. Going forward, we are looking at an integration strategy. While operations is one aspect of it, the strategy is 90% people centric says Mr. Misra. A global outlook and cross-cultural adaptability are among the key competencies that we are looking for in our leaders of tomorrow. Mr. Misra is of the opinion that in our quest for international acquisitions, we need to make sure that we dont lose what is unique to Tata Steel- employee centricity, a belief in values, ethical conduct, operating efficiency and care and concern for environment and society. Whether in Singapore or South Africa, we need to make sure we align all our employees to the values and operating principles of the Tata group Mr. Mehta, on the other hand contends if you ask me the nationality of Genpact, I will say that the question is irrelevant. We aspire to be a global player in every sense of the word and one our key strategic thrust is towards developing local leadership in all locations that we operate inIndia, China, Mexico or Europe Building a leadership pipeline If you ask me the single most worrying trend that I see today, it is the job hopping that we are seeing among youngsters of today. By the time these people have 6 years of experience, they have had tremendous width in terms of exposure but not enough depth. If this trend continues, we could be looking at a leadership crisis another 10 to 15 years from now. Says Sanjay Bhargav of Marico. According to Mr. Jha make that 10 years. We are already looking down the barrel. Its happened in Thailand- they have a booming economy but no leaders to drive it. Is has led to tremendous spare capacity The answer according to Dr. Sangram Tambe of Tata Motors lies in homegrowing talent. We at the Tata Group have always believed in it. Let me tell you, in its quest for readymade talent, corporate India is borrowing against its future Sanjay Singh of Whirlpool however has a different take at the end of the day, it does not matter if India has the talent or China has the talent as long as India is an attractive talent destination. We are likely to seen a huge influx of expatriates in the coming few years. Ensuring work-life balance Work-life balance has been the first casualty of the pressure packed working environment of the corporate world today. Some organizations like Avaya Global Connect actually have work-life balance as a stated corporate value. Employees are expected to demonstrate how they tie in corporate values while achieving objectives. This is a prerequisite to promotion in some of the forward-looking companies. A lack of work-life balance has been found to drastically affect productivity levels and quality of working conditions for most employees. Many organizations have been trying to enforce this through a series of measures.
10
Organizations recognize the need for employees to unwind and spend time with their families. Companies like Eli Lily have a scheme where, upon meeting certain criteria of performance, an employee, regardless of grade gets to pick a location (from a basket of national and international locales) for an all-expenses-paid family holiday. This has emerged to be among the more popular perks in the New Economy organizations Building work-force capability To adequately equip and enable the workforce to improve performance is also an emerging challenge faced by HR Leaders, especially in view of increased competition in the marketplace. Companies like Ranbaxy are investing heavily to upgrade skills of their workforce and even offer incentives and career breaks to acquire higher qualification. For New economy industries identifying skills, which will be hot in the future, acquiring and internalizing them is an essential part of the race to stay ahead. In some organizations once future talent is identified and brought into the organization Talent Transfer is encouraged. By linking compensation to acquiring the new skill existing employees are motivated to constantly upgrade. In the process work-force capability in enhanced. Enforcing corporate vales and operating principles In the age of cut-throat competition and considering that numbers are taken as the sole measure of performance, getting employees to live corporate values and operating principles is a challenge before HR Leaders. Ensuring quality and customer satisfaction It is a buyers market and customers are becoming increasingly demanding. For HR, employees are the customers and ensuring quality and transparency is paramount in all business processes that the organization undertakes HR as a function is moving away from being a support function to the fulcrum of business strategy. Customer Satisfaction is therefore as much a responsibility of HR as that of any other function. Customer Satisfaction is built in as a metric in the performance scorecard of all associates in most organizations and carries a heavy weightage. Promoting innovation Organizations need to innovate to stay ahead in the race. To facilitate a culture of learning and innovation is an emerging challenge for the HR leaders of today. Some organizations have a separate Business Unit e.g. Centre for innovation & New initiatives. Employees across the organization, depending on their performance and aptitude are nominated to work in the centre. The nomination is highly coveted and the nominee is better compensated.
11
Section 4
12
54% 55%
HR Managers Employees
24% 11%14%
16% 4%
Brand Name of the Training Programs Organization
3%
Talent pool in the organization
7%
1%
Prospects of Overseas assignments
4%
2% 3%
Company policies and procedures
Organizational culture
The chart maps employers and employees perceptions of key attractants to an organization. It is evident from the above that HR Managers have their finger on the pulse when it comes to the key factors behind attracting talent i.e. Career Growth &Learning opportunities followed by brand equity of the organization; Compensation and Benefits comes in a distant but significant third. The message is clearly and well understood all across-money matters but not at the cost of growth. Factors like a professional working environment and a caring employer matter more than a fat paycheque when a prospective employee looks at options. The good news is HR managers of Indias leading companies are aware of this sentiment. Surprisingly, job content does not seem to figure as a factor for employees when choosing a career. One line of thought regarding this, as expressed by an HR head- Job content has today become a hygiene factor. Everyone in an organization- Top Management, Line, HR is only too aware of the need for enrichment. Look at the Telecom industry- is it anybodys case that say, a training role in company X is different from a training role in company Y? Employees today carve out their own roles in an organization. However, in the pharmaceutical and financial sector and across brand management and production, employees rank compensation and benefits in second position and brand equity of the organization as a distant third. Compensation is also relatively more important to employees in functions like customer relationship and HR.
13
Policymakers would be interested to know that employees in the pharmaceutical sector especially entry level employees) attribute significantly lower importance to Brand Equity (10%) while employees in Telecom (especially entry and junior management level employees) attribute significantly higher importance to Brand equity of the organization (18%). The writing in on the wall for HR managers to see- Compensation may be important; but if one wants to attract the best talent, the Organization needs to package itself as an attractive destination where employees have opportunities to acquire new skills, hone existing ones and work in an environment thats professional and conducive. HR Heads seem to have taken cognizance. Only 11% of the HR Heads interviewed admitted to being in the Top Dollar Game. Most organizations(46%) believe in paying competitively and stressing on high rewards for good performance. Another large section (37%) say they believe in paying competitively and stress on career growth opportunities. How much does an MBA matter? An MBA is an overwhelming favorite when it comes to preferred qualification for recruitment at entry level positions. 87% of HR Managers said that they would prefer an MBA for recruitment at the entry level for the HR Function. The corresponding figures for Marketing and Sales were 74% and 51% respectively. Like last year, this year too, MBAs dont seem to enjoy much advantage in recruitment to the Finance function. In Finance, specialist Post-Graduates like CAs are preferred. The MBA however seems to have lost its glitter when compared to last year. Compared to 75% last year, only 67% of the HR Heads covered this year say that a premium is offered to MBAs over others.
14
COMPENENSATION & BENEFITS AS A TOOL TO DRIVE PERFORMANCE & BUILD WORKFORCE CAPABILITY
The graph represents critical factors that drive performance from an employee perspective
Compensation
Training
Talent Fit
Job Content
W ork-life balance
W orking environment
Recognition
Pride in work
As is evident Compensation and Job content are critical across all industry sectors, with compensation being highest at 22% and Job Content coming a close second at 21% on a total basis. This trend is maintained in Frontline functions, reversed in Support functions (Job content26%, compensation- 20%) while for Line functions compensation is ranked third (Job content23%, Working environment -20% , compensation- 15%)
15
The BPO Sector seems to be doing something right in aligning the PMS to developmental needs of employees as employees feel that the PMS is almost as vital as Compensation in building workforce capability. Senior Management rate Job content as primary and Compensation much less important, but still at second place. Trends indicate that the importance of job content increases at higher levels of the management hierarchy. So Compensation and Job content are key- do HR managers understand this? Is their perception of what drives performance in sync with what employees say?
Employees
30% 25% 20% 15% 10% 5% 0%
Compensation Training Performance Management System Talent Fit Job Content Work-life balance Working environment Recognition Pride in work
HR Managers
As is evident there is dissonance- what HR managers see as key (Talent Fit and Performance Management System) feature only in 4th and 5th positions in an employees mind. To build workforce capability managers say they are currently focusing on talent fit and job content. But considering that 76% of employees feel (either agree or strongly agree)that a higher pay package would motivate them to work harder towards organizational goals, one wonders- is the importance of compensation being underrated? Compensation was the most important determinant of job satisfaction for 72% of employees (agree or strongly agree). The message is clear- compensation needs to feature more prominently in strategies aimed at driving performance and building workforce capability.
16
21 17
13 12
15 11
43 40
18 16
18 22
27 18
16 NA
19 NA
25 NA
As can be seen, the attrition menace in the BPO sector has become more menacing since last year. In the Financial Sector too, the attrition rates have gone up significantly to hit the danger mark. Expectedly again, Marketing and Sales functions see the highest attrition in all sectors. Retaining Technical people is a challenge in the IT Sector.
48%
Employees(Base: 730)
22%
8% 2%
8% 3% 2% 1% 2%
As is evident career growth opportunities are the primary reason followed by the lure of better compensation.
17
Is this true across sectors? Compensation seems to be most important in the BPO sector. Other sectors largely reflect similar trends. When comparing across levels, senior management (12% named it as a factor) attributes more importance to job content and work-life balance as compared to junior management (6% said that it matters). So do HR Managers and employees see eye to eye on this one? Do HR managers really understand why employees leave?
Reasons for attrition (Entry Level)
69%
HR Managers Perspective (Base:45)
51%
53%
10% 0%
5% 4%
Talent Fit Job Content
7% 4% 2%
Immediate supervisor
1%
Family responsibilities Location of workplace
2%
Company policies & procedures
Work-life balance
72% 61%
46%
24% 17% 9% 8% 7% 2%
Compensation Career Growth Learning Opportunities Talent Fit Job Content
8% 2%
Work-life balance
11% 3%
Immediate supervisor
1%
Family responsibilities
2%
Lack of recognition
1%
Location of workplace
2%
Company policies & procedures
18
HR managers seem to think that entry level employees are easily lured by money- but employees at this level claim to differ they say career growth and learning opportunities are the key enticers, compensation is a distant second. Should this be believed? Considering that a significantly higher number of employees (10% entry level employees as opposed to 3% -Junior mgmt, 5% -middle mgmt and 0% -Senior mgmt.) said they would jump ship even for a hike of less than 20%, maybe employee speak at this level needs to be taken with a pinch of salt. At a Junior management level also, HR managers underestimate the importance of growth and learning opportunities- to employees it is clearly more important than compensation. This is probably true given the fact that majority of the employees at this level said they would job hop only for salary differentials of 30-40%
Reasons for attrition (Middle Mgmt Level)
58% 51%
HR Managers Perspective (Base:45) Employees Perspective (Base: 214)
22%
20% 10% 0%
17% 9% 7%
16% 7% 9% 2% 3%
Job Content Work-life balance
16%
13% 2% 3%
Lack of recognition Location of workplace
4%
Company policies & procedures
Compensation
Career Growth
Learning Opportunities
Talent Fit
Immediate supervisor
Family responsibilities
40%
37%
31% 22%
20% 12%
18% 16%
6% 7%
9% 10%
11%
7%
4%
7%
Location of workplace
19
At the middle management level, HR managers seem to have better understood the pulse of the employees- their understanding follows the same trend as employee perception although the importance attributed to parameters is different. Senior managers clearly state that compensation is a distant second, this verified from the fact that almost none of them would consider a job switch for a pay hike of less than 20%. Majority would only move if the salary differential was above 40%. However, HR Managers give a higher billing to Job Content over Compensation for Senior Management. They are clearly underestimating the importance of Compensation for executives at this level. Thus contrary to popular opinion, it is Career Growth and not Compensation, which prompts employees to jump ship. Given this, spot payments and renegotiated salaries (even deferred payments) can be rather ineffective. If organizations want to retain talent, they need to ensure that their high potential employees dont feel stagnated. Yet compensation is important as is evident from above, so it is important for HR managers to understand how much of a salary hike would make an employee jump ship? Although close to 40% of the employees say 30-40% hike in pay, responses vary across levels, sectors and functions
20
HR Managers(Base:45) - Mean% 21
50% 45%
47%
HR Managers(Base:45)-Mean% 29 Employees(Base:292)-Mean % 34
42% 36%
Employees(Base:142) - Mean % 32
40%
30% 25%
31%
11%
13% 7%
15% 10% 5%
11% 4%
11%
30-40%
Above 40%
0%
Upto 20%
20-30%
30-40%
Above 40%
Middle Management
Senior Managemnet
HR Managers(Base:44)-Mean% 32 Employees(Base:215)-Mean % 36
50%
41% 40%
HR Managers(Base:44)-Mean% 36 Employees(Base:82)-Mean % 36
45% 40%
30%
35% 30%
20%
26%
26%
Upto 20%
20-30%
30-40%
Above 40%
Upto 20%
20-30%
30-40%
Above 40%
HR Managers appear to have underestimated the salary differential which will cause a person to change his/her job across levels.
21
Across Sectors significantly higher number of employees in BPO/ITES (especially frontline employees) said they would consider a job switch even for a less than 20% hike in pay, while in the IT sector majority of the employees say they will consider a switch for a salary hike on 3040%. If one were to compare sectors to judge the priciest, it would have to be IT- significantly higher number of employees here said they would jump only for a salary hike of more than 40%.The pricier among the priciest were junior management and frontline employees in the IT sector. Across functions, Brand Management and HR clarify that they would not consider a switch if salary difference was less than 20%. Employees working in Customer Relationship, though would jump largely for a 30-40% pay hike. Interestingly people working for companies which rank amongst the top 10% paymasters seem to be the most flighty - a significantly higher % said they would jump even for a raise of less than 20% as compared to those who work for companies which are in the bottom 50% paymasters.
22
Section 5
Senior Mgmt 05
1,51,345
1,39,959
1,15,556
1,35,000
1,50,000
1,47,000
1,99,167
NA
NA
NA
IT clearly comes across as the top paymaster overall. It is the market leader at the Entry, Junior and Middle levels of the Management. At the Senior levels, however, it is is the Financial Sector which pays Top Dollar. Manufacturing is competitive only at the Entry level. According to a fresh IIT Graduate working in a leading Manufacturing Organization-Manufacturing is not glamorous but if you really want to learn, this is where every engineer should begin his career. Even on Campus, the really bright ones go for the bigger manufacturing firms, not-as popular perception will tell you, to IT. For a fresher, in-fact the Manufacturing biggies pay better. The good ones, however dont stay-they want to go in for higher studies. This however does not explain why this sector has been successfully able to lay hands on some high profile talent at the very top level. As Mr. BN Jha of Avaya Global Connect, who has earlier worked with the Tata Group, puts it- what manufacturing offers besides a career is a lifestyle. Something we here are trying to emulate. Besides, look at the challenge- you are dealing with thousands, not hundreds of people and such a heterogeneous profile- from double PhDs to matriculates. Where else do you get to handle complexity of this magnitude?
23
What happened to BPO? Well, what about BPO? We create jobs. Meaningful jobs. We never claimed we create millionaires. Says a BPO HR manager rhetorically. Enough said. The figures tell the rest of the story. BPO is not where the money is. BPO is where the jobs are. The story of the Financial Sector The Financial Sector has seen the greatest spurt in Salary levels since 2005. The sector is just coming on its own, with salaries heading northward across levels. The other Sunrise sector- Pharmaceutical The trend is roughly along the same lines as the Financial sector- conservative at the Entry and level and competitive at all other levels. And arguably for the same reasons- We visit A-tier B schools but thats not where we hire from in bulk. At the entry level, we need feet-on-street people. These are exceptional people with the right attitude-they believe in working hard and are highly result oriented. Once they have proved their merit, there are rewards galore. avers an HR executive. Retail- The new BPO The retail sector seems to have a lot of parallels with the BPO sector where people issues are concerned. Namely- high attrition, huge headcount, blinding growth rates, low entry barriers and low salaries. The odd Rajeev Karawal aside, the pay-figures do not seem encouraging at all. Are we looking at an upward curve in the coming few years? Unlikely says the HR Head of a Retail Major. We need good people but if you look closely, there are no hot-skills which will really jack up salaries. Its a new sector where all the learning will be from scratch. The challenges for retail in India are going to be of a different nature if you compare it with the rest of the world. We may be looking at a younger lot of people for the Senior Management- people who dont come with baggage of experience or set paradigms Consumer Durables and FMCG- Yesterdays sectors? An emphatic no. The market is glutted all right but you can never count these sectors out. Says Pankaj Bhargav of Marico. There is some consolidation happening in these sectors which has led to jobs being cut. But trust me, we are looking at an upswing sooner than you think.
24
How much will Salaries rise? Salaries are expected to rise as follows at various levels of Management in the next 12 months
Level Entry Level Junior Mgmt All Industry 16 17 Mfg. 13 17 IT 20 17 BPO / ITES 18 15 Pharma 15 15 Telecom 13 13 Financial Sector 15 15 Consumer Durables 12 15 FMCG 13 15 Retail 21 24
Middle Mgmt
18
17
18
15
20
20
12
18
15
25
Senior Mgmt
17
15
15
12
20
18
12
18
17
24
Retail clearly emerges to be the leader here with 20% salary jumps across levels. 2007 will see salaries going up but it wont exactly be a bonanza. Jobs will created but those looking for quantum jumps in their salary package are likely to be disappointed. As an HR Leader put it- We are being cautious. We will increase headcount but theres no point going overboard to get people in. We dont want a situation where we cannot justify our wage bill and have to retrench. If we bring in new people at higher salaries, we will have to ensure parity for existing employees. This could snowball into something we had rather avoid There is always curiosity about who is earning how much, which function/specialization pays more, does the differential hold true across levels etc. The following table helps put all this in perspective (data only indicative) Assuming a base salary of Rs.100 for HR at leach level, salaries pan out as follows
Production/ Manufacturing 85 91 101
Technical 95 100 98
Training 91 91 95
Finance 94 97 105
As can be seen, HR today does not fetch much premium as a functional discipline. No surprises here, Marketing and Sales are the highest paid functions. The scenario is however likely to undergo a sea change. In the next 5 years Marketing, HR and Quality are the functional disciplines likely to command a premium.
25
Within HR specific skills, which will command a premium, include: - Training, Recruitment, Compensation and Competency mapping at Junior management level - Performance Management, Competency mapping, Organizational development, Compensation and Training at Middle management level - Organizational development, Performance management, Competency Mapping at Senior management level Within Marketing, specific skills, which will command a premium, include: Sales promotion management, Marketing communication, Supply chain, Market Research at Junior management level New Product development, Market Research, Supply chain at Middle management level New Product development, Market Research at Senior management level
Although HR may not be coveted at senior levels, Marketing and Technical will certainly command a premium. In this age of job-hopping, does sticking to an organization make sense? Yes, if figures are to be believed. A post-graduate who is a good performer can expect an increase of 117% over 5 years if he sticks to his first job. In other words, he can more than double his starting salary. Even average performers who are simple graduates can expect a 65% increase in salary. Does qualification matter? In one word-Yes. Though some organizations claim that qualifications are only looked at the time of recruitments and subsequently, it is performance, which matters, post-graduates are likely to receive higher raises as the table below indicates.
Good Performer Graduate Post Graduate Engineer 97 120 117 Average Performer 57 72 74
26
How much does salary go up upon promotion? The following table gives the percentage increase upon promotion in various sectors of the Industry.
Level Junior-middle management Middle-senior management All Industry 29 35 Mfg. 21 29 IT 28 28 BPO / ITES 50 44 Pharma 13 38 Telecom 25 31 Financial Sector 29 38 Consumer Durables 25 25 FMCG 28 33 Retail 41 54
As can be seen, the BPO sector offers maximum jump upon promotion. Upon promotion from Middle to Senior level, it is Retail which offers the biggest jump. The message for middle level executives looking at a jump- Retail is where to head if it is money one is looking for. Raises are conservative in the Manufacturing Sector. However, it continues to be a favoured destination for Middle level executives looking for a change. Figures confirm what anecdotal evidence seems to suggest- that employees in the Manufacturing sector have a long wait before they see a significant difference in their financial lot. There is a deep sense of stagnation among employees in this sector. Says an employee with an automobile major. I see my batch-mate from IIT who works with a Telecom sector driving an Esteem while I still drive an Alto. This, when I started out on a higher package when we passed out. Progress here is very slow but it cant be helped. There are simply too many levels
27
Section 6
85% 78%
80%
76% 68%
76%
69%
74%
74%
76%
60%
40%
20%
0%
Manufacturing IT BPO / ITES Pharmaceutical Telecom Financial Sector Consumer Durables FMCG Retail
Is compensation competitive?
Again being from the top 20% paymasters, majority of the respondents agreed that their salaries were competitive when compared to colleagues at the same level in different companies. Across sectors, this opinion was more pronounced in Manufacturing and Telecom and more pronounced in junior management than other levels
28
77%
80%
74% 56%
60%
40%
20%
0%
Manufacturing IT BPO / ITES Pharmaceutical Telecom Financial Sector Consumer Durables FMCG Retail
80%
74% 65%
72%
60%
40%
20%
0%
Manufacturing IT BPO / ITES Pharmaceutical Telecom Financial Sector Consumer Durables FMCG Retail
When referring to flexibility in compensation package employees were also perhaps referring to salary structure- given a choice between a higher aggregate pay package which translates into a lower take-home post taxes to a lower aggregate package which is more tax friendly, most employees preferred the latter.
29
With my current levels of savings and investments, I feel that I will be able to provide for medical emergencies like accidents/severe illness post-retirement 100% 80% 65% 60% 40% 20% 0%
Manufacturing IT BPO / ITES Pharmaceutical Telecom Financial Sector Consumer Durables FMCG Retail
51%
30
Perception of benefits.
The most common benefits across industries seem to be o Performance based rewards o Health Benefits o Car Scheme o Medical Benefits for spouse and children o Cell phones and laptops o Medical Benefits for dependent parents o Employee referral scheme o Housing Support The comparatively less common ones are o Credit card o Flexible Benefit Plan o ESOPs o Foreign Trips/ Vacations o Sponsored Family outings The uncommon ones are o Crche o Post retirement medical benefits o Paternity leave o Adoption Leave While ESOPs, Car scheme and Credit card are offered to Middle and Senior Management in most companies, other benefits including Foreign Trips, Housing Support and Employee referral are more universal in scope. From an employee perspective Medical Benefits (87%) Housing Support (67%) and Retirals (57%) are the three most essential benefits. HR managers opinions seem to reflect the employees viewpoint when it comes to Housing and Medical schemes being important, but they do not consider retirals as employees do- they feel that to employees Car scheme, ESOPs and Flexible benefit plan are as or more important than retirals. Is the dissonance real? Despite the conflict it is evident that while decision makers are focusing on higher order needs- the social security needs of employees are still calling for attention.
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Today, employees are living longer, living alone and need Social security. Gender roles are getting redefined. Both spouses need to share responsibility. The message is clear- Corporate India needs to be better aware of the changing needs of its employees. Among the gripes heard from Employees- that the HR policies are not responsive to the changing socio-economic scene of Corporate India. This is evident from the fact that paternity leave has still not come into vogue. Corporate India has a long way to go to display more sensitivity towards the new trend of nuclear families where fathers need to take time off to support their wives during pregnancy. Creche facilities need to be made available keeping in view the increasing incidences of mothers of children taking up work. Considering that people today are living longer and in the age of nuclear families, postretirement medical benefits become extremely important.
However this scenario will change in the next two years as most of these benefits could come into effect across organizations- most companies who are not offering these benefits currently are considering offering them in the next 2 years.
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Section 7
Perception of performance based pay across sectors Employees who feel the trend is welcome
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mfg. IT BPO/ITES Pharm a Telecom Financial Sector Consum er Durables FMCG Retail
Industry sectors
From the above graph it is evident that the trend is welcomed by employees across sectors especially in the Manufacturing industry.
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Is Variable pay here to stay? The following table answers the query. As can be seen, the percentage of variable pay increases across levels.
All Industry Entry Level Junior Mgmt Middle Mgmt Senior Mgmt 12 14 17 20 Mfg. 10 11 15 17 IT 5 14 24 26 BPO / ITES 12 13 13 19 Pharma 20 Telecom 13 14 18 25 Financial Sector 11 11 14 23 Consumer Durables 10 13 14 12 FMCG 10 13 14 16 Retail 19 22 25 27
Performance based pay is increasingly becoming popular even among the support functions. The variable component of the pay depends on both individual/team and organizational performance and increases across levels of the management hierarchy. It is also interesting to note that 50% of weightage is assigned to non-financial parameters of performance and leadership competencies for incumbents in Senior Management role. There is greater acceptance among employees regarding variable pay and the total variable payout as a percentage of the total wage bill has been increasing over the last 3 years The Retail sector has the greatest orientation towards performance in its pay structure. If there are any doubts left, 100% of the organizations studied have a Variable Pay Plan in their salary structure. So, how much do organizations shell out to reward performance? The following table indicates the total variable payout as a percentage of the wage bill over the past 12 months for various sectors.
All Industry 17 Mfg. 17 IT 20 BPO / ITES 19 Pharma 14 Telecom 18 Financial Sector 21 Consumer Durables 14 FMCG 14 Retail 18
No surprises here, the Financial Sector takes the cake in rewarding performance. According to an HR head of a Banking major- A big part of Compensation Package of most associates is at risk and unlike many other sectors, where the variable component is added only to swell the CTC figure, we consistently reward good performance with monetary incentives.
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How common is pay for performance? Majority (69%) of the employees polled also said they had a performance based component in their compensation package. The percentage was significantly higher in BPO/ITES and Telecom sectors where 77% and 83% respectively said that they had a Performance Based component in their pay structure. and significantly lower in the financial sector where only 58% said that a part of their pay was at risk. (this is at variance with the opinion of HR Leaders of the Financial Sector as a majority say that Performance Orientation is strongly built into the Compensation Structure). Incidence increased with increase in management level. A significantly higher proportion of experienced professionals had a performance based component in their compensation package as compared to freshers. All companies surveyed had a Performance Pay Plan in their salary structure.
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What is the response of employees? Cautious optimism- 59% felt ESOPs were an attractive mode of compensation. The sentiment was reflected across sectors. Senior management was more positive then middle management, junior management was more positive than entry level employees. Perhaps at higher levels of management ESOPs look more favorable. However given a choice between ESOPs worth 20% of their annual take home or a spot payment of the same amount, more employees (54%) preferred the latter option. This was especially true of the BPO/ITES sector. Employees obviously prefer the solid reassurance of cash in their bank accounts to the lure of notional lucre.
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ANNEXURE
I feel that I am fairly compensated for my efforts by my company
100%
85%
80%
69%
78%
76% 68%
76%
74%
74%
76%
%Top2Box
60%
40%
20%
0%
Mfg. IT BPO/ITES Pharma Telecom Financial Sector Consumer Durables FMCG Retail
Chart - 1
75%
77%
78% 66%
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Chart - 2
The pay package offers me enough flexibility to do what I want with my money 100% 70% 65% 70%
80%
%Top2Box
67%
60%
40%
20%
0%
Entry Level Junior Management Middle Management Senior Management
Chart - 3
The pay package offers me enough flexibility to do what I want with my money
65%
74%
72%
%Top2Box
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Chart - 4
With my current levels of savings and investments, I feel that I will be able to maintain my current standard of living post-retirement
100% 80%
%Top2Box
Mfg.
IT
BPO/ITES
Pharma
Telecom
Financial Sector
Consumer Durables
FMCG
Retail
Chart - 5
Three most important benefits that should be provided to employees in your organization?
100% 80% 60% 40% 20% 0%
Medical Retirals Housing Support Car Scheme ESOPs Flexible Benefit Plan Loyalty Bonus Incentives Performance Based
55% 48%
34%
17%
20% 1%
Employees
HR
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Chart - 6
Which of the following benefits do you currently offer to your employees? 98% 100% 87% 80% 60% 40% 20% 0% 80% 72% 64% 65% 48% 38% 24% 28% 20% 9%
ESOPs Performance Based Rewards Sponsored Family outings Foreign Trips/Vacations Car Scheme Housing Support Corporate Credit Card Cell Phones & Laptops Employee Referrel Scheme Health Benefits Flexible Benefit Plan Paternity leave Adoption Leave Creche Facilities Post retirement medical benefits Medical benefits for employees spouse and children Medical benefits for employees dependent parents Loyalty Bonus
96% HR 64%
93% 80%
30%
35%
Chart - 7
Why do you feel Infosys has the best Compensation and Benefit Policies?
100%
Employees
31% 15% 5%
10%
40
Chart - 8
Why do you feel Wipro has the best Compensation and Benefit Policies?
100%
Employees
48%
16%
17%
Chart - 9
Why do you feel Tata has the best Compensation and Benefit Policies?
100%
Employees
Chart - 10
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