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Global Compensation & Benefits structure and cost

A Report
by

Vishruta Mattu 13PGDMHR61

Genpact

A Report Submitted in Partial fulfillment of the requirements of


PGDM-HR program

International Management Institute


New Delhi 110016
24th June 2014

Acknowledgements

The successful completion of this project depended on certain people I would like to thank for their
support and encouragement in course of my internship.
To begin with, I would like to thank the Placement Cell of IMI New Delhi that provided me with the
opportunity to intern with Genpact. I would also like to acknowledge the role of my faculty mentors,
formally and informally so but undeniably a source of unending support, Mr. R.P. Ojha and Dr. Afsha
Dokadia, whose ideas and expectations kept me motivated to achieve and deliver my best for the project.
My industry mentor, Mr. Rajiv Arora, Human Resources Leader, Mercer GOSS, India helped me prepare
and put in place preparatory work plans beforehand, which gave me great confidence on my first day of
internship to begin with. Touching base with him helped me stay grounded to industry expectations and
honing my approach to the work assigned.
Most importantly, I would like to thank my team at Genpact, the Global Compensation and Benefits team,
every member of which helped me gain better understanding of subject matter involved as well as tips to
improve the project output. My organizational guide, Ms. Aarti Sharma, Assistant Vice President- Global
Compensation and Benefits provided me with the phenomenal balance of autonomy in work design and
providing direction as and when sought by me. Assistant Vice Presidents, Mr. Sudhanshu Bhatnagar and
Mr. Viral Bansal also employed an open door policy wherein I could approach them with queries or
concerns whenever I felt the need. The global teams, especially Ms. Laura Draghici and Mieke
Hellingman De Roode, Sindhu Varghese, Latika Pandey, Anchita Bhatnagar, Maggie Wu and Bingbing
helped me with regional data and understanding pay structures in their offices. Last but not the least, my
Buddy Ms. Ankita Sharma, and a great source of analytical thought, Mr. Amit Bansal, helped me in
adjusting with the Genpact working style, alongside a nurturing and friendly environment that really
made me appreciate the culture at Genpact.

Thank you all for showing confidence in me, it has led me to explore my capabilities in greater depth.

Confidentiality Clause

The project findings include internal data of Genpact for which permission has
been strictly refused. To that extent, the findings of the project cannot be shared.
Broad directional outcomes may be presented .

Executive Summary

Compensation and Benefits forms 70% of Genpacts revenue base and Genpacts rapid expansion both
organically and via acquisitions has increased complexity in pay structures and practices. Thus, it is
imperative to study each region and entitys pay structure and practice to analyze scope for both
standardization and cost saving.
The project aimed to create a central repository of compensation and benefits practices of Genpact offices
and acquired entities across the globe.
Post collation, inter-country comparisons and high cost item identifications would follow in order to make
recommendations on potential cost savers and to achieve standardization.
Thus, output would be country-specific documents detailing nuances and legal provisions, one-pager
country profiles for quick comparisons and a global overview document, followed by an impactfeasibility graph that plots pay components against the extent to which they can be restructured
(i.e.feasibility) depending on whether they are mandated by local law, driven by collective labour
agreements, promoted by industry practice, country tax practice or by Genpact voluntarily.
The process began with an introduction to me and the project on a global announcement mail and global
call, followed by an email requesting documents and subsequent rounds of calls for clarifications and
filling in missing information. This was matched against a checklist of questions prepared for the call
interviews.

While the results pertain to the companys internal data and cannot be disclosed, a broad outline
can be shared, as below:
Europe

Benefits were high cost as well as high feasibility in European nations i.e. they were not
mandated and were mostly best industry practices
In some European regions, allowances had a higher cost/base pay percentage, i.e. they
were costlier than benefits and while some of these were either mandated or for expats,
many others were best industry practices or promoted by country tax practices and to that
extent voluntary.
Collective labour agreements usually governed topics like paid leaves, retirement (in
countries where it wasnt mandated), disability insurance terms and even involved agebased increments in some cases
It was observed that in certain pockets of Europe, benefits were not non-cash components
and could infact be encashed by employees in the form of vouchers, coupons and tickets

US

In the US, paid leaves and retirement benefits were high on cost but low on feasibility
since employer value proposition in US determined by the number of voluntary benefits
it provides to its employees
In the US, it was found that acquired legal entities had similar structures but depending
on the nature of the business, there were certain differences with regards to negotiations
on wages and benefits

Latin America

Gautemala has highly regulated pay norms wherein 13th month bonus (payable in
December), 14th month bonus (payable in July) and monthly bonus (Q250 per month
across bands) are mandated by state. Even paid leaves and severance pay are predetermined by the state
Mexico is not as heavily regulated and follows a slightly different structure wherein
weekly bonus, shift bonus and production bonus are provided to certain bands of
employees

South Africa

Follows 3 salary structures owing to expatriates and acquired entities over and above
Genpacts existing pay structure

Asia

Social security contributions by employer are mandated in China and Philippines mainly.
13th month bonus is also provisioned in both these regions.
Singapore is more or less aligned to its Indian entity in structure although costs for
insurance are very high owing to expatriate packages which can now be changed due to
favourable local hiring opportunities

Globally, consolidating to include fewer insurance vendors would mean us giving them greater
bulk of clientele and hence greater discounts to the company.
Conclusions & Recommendations

Allowances and benefits are many and voluntary. They complicate the structure of pay in
Europe especially when certain benefits become encashable since that is a higher cost to
company
US entities are many and follow different structures. Standardization may help attain
greater centralization although business-specific nuances should be allowed to exist

Latin America pay provisions are heavily regulated in some countries but low cost
arbitrage still exists
South Africa follows three different salary structures but they do not differ greatly except
for one or two components
Benefits in China and Philippines have high rigidity since many of them are mandated.
India and Singapore are more flexible. Singapore has a number of allowances and
benefits for expatriates which are high cost and can be restructured since local hiring
conditions have become favourable

Table of Contents

1. Chapter 1: Introduction9
1.1. Introduction to the company.9
1.2. Introduction to the project..10
1.3. Problem Formulation & Research Rationale..10
1.4. Literature Review .11
1.5. Theory.19
1.6. Research Objective(s).23
1.7. Research Question(s)..23
1.8. Hypothesis..23

2. Chapter 2: Method....24
2.1. Sample....24
2.2. Measures (Questionnaire)..24
2.3. Procedure (Data Collection)..24

3. Chapter 3: Results & Discussion.27


3.1. Results..27
3.2. Analysis & Implications...31
3.3. Limitations32
3.4. Suggestion for future research..32

4. Chapter 4: Conclusion.33
4.1. Conclusions & Recommendations...33

References...34

Appendix: Genpact Org. Analysis Models, Top 10 Learnings...35


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Chapter 1: Introduction
1.1 Introduction to the company
Genpact is a global business process outsourcing firm present across 23 countries with a
workforce of 62,000+ employees across the world and a revenue of $2B (2012). It was founded
in 1997 as a business unit of General Electric as a beta site for applying and offering Six Sigma
in Services.
Genpact has undergone 6 generational journeys thereafter:
Gen 1 (1997-2003): Beta site for Six Sigma in services
Gen 2 (2003-2005): Movement from Captive (GE clients) to Independent Clients
Gen 3 (2007): Provision of Reengineering and Business Process Management Solutions (BPMS)
Gen 4 (2008): Adoption of End-to-end thinking, expanding reengineering beyond piecemeal
processes
Gen 5 (2009-11): Generating Business Impact through Lean Six Sigma Processes
Gen 6 (2012 onwards): Transformational Journeys- Business transformation by innovating Six
Sigma processes
Cost
Management
Driven by
cost
advantage

Transactional
Services

Project
Management
Driven by
cost,
quality and
delivery

BPMS
Application
Driven by
technical
skills

BPMS
Innovation
Driven by
competency

Business Reengineering Services

BPMS
Leadership
Driven by
innovation

Transformation
Services

Further information pertaining to the company has been produced in Appendix 1.


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1.2 Introduction to the project


The project was to create a central repository of compensation and benefits practices of Genpact
offices and acquired entities across the globe.
Post collation, inter-country comparisons and high cost item identifications would follow in
order to make recommendations on potential cost savers and to achieve standardization.
Thus, output would be country-specific documents detailing nuances and legal provisions, onepager country profiles for quick comparisons and a global overview document. Below is the
project summary:

1.3 Problem Formulation & Research Rationale


Compensation and Benefits forms 70% of Genpacts revenue base and Genpacts rapid
expansion both organically and via acquisitions has incleased complexity in pay structures and
practices. Thus, it is imperative to study each region and entitys pay structure and practice to
analyze scope for both standardization and cost saving.

10

For example: Acquired entities in India follow a different pay structure and practice from
Genpact although efforts are being made to align the two- this is only possible once an indepth
study of both structures has been carried out to understand the cost implications as well as
company-specific practices that have been carrying on for a long time and may affect employee
reception.
Similarly, European countries follow a very different pay structure than India owing to
differences in external environments, local best practices in both regions. However, how much
the structure can be simplified and aligned to Genpact India again requires an understanding of
how the prevailing pay structures came into being.
The application of these studies is depicted below:

Order of increasing impact

1.4 Literature Review


Luis Gomez Mejia and Steve Werner (2008) in their articles for the book Global Compensation:
Foundations and Perspectives (Global HRM) state the importance of understanding compensation culture
across countries in order to be able to understand different pay structures and practices on benefits. In
support, Barry Gerhart provides a compensation structure based on Hofstedes Cultural Dimensions:
Compensation systems are likely to be more hierarchical (greater pay and benefits
differentials between job levels in high power distance countries.
Power distance

Compensation systems that rely on employee participation (e.g. gainsharing) and


broad-based employee stock options and ownership plans are more likely in low
power distance countries.
Performance-based pay (especially for individual performance), extrinsic rewards,
external equity and short-term orientation are more likely in individualistic countries.

Individualism
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In less individualistic countries, seniority, intrinsic rewards and internal equity are
more likely.

Uncertainty
avoidance

Variable pay/incentives, decentralized pay-setting and external equity are more likely
in low uncertainty avoidance countries. Individual performance-based pay more
likely.
Fixed pay (e.g. base salary), centralized pay-setting and internal equity play a greater
role in high uncertainty avoidance countries. Compensation based on seniority more
likely.

Masculinity

Short term/Long
term orientation

Differential pay policies that allow inequality in pay, promotions and so forth based
on gender as well as paternalistic benefits intended to be geared primarily toward
women are more likely in countries lower in masculinity. E.g. Maternity leave,
flexible benefits, workplace childcare and career-break schemes likely.
Short term incentives such as performance bonuses and fast track career path
accompanied by merit pay and promotional pay increments for countries inclined to
results in the short term, depending on economic urgency.
Long term incentives such as equity options, restricted stock units (RSUs), seniority
pay and recognition for countries inclined to long term orientation.

Source: Based on studies by Gomez-Mejia and Welbourne (1991), Schuler and Rogovsky (1998)
Gregorio Sanchez Marin (2008) adds to Barry Gerharts theory in his article National differences in
compensation and cultural context in the book Global Compensation: Foundations and Perspectives
(Global HRM). He brings to fore the high variable pay percentage for sales in the USA, role of collective
bargaining in Germany, influence of governmental norms for employer contribution to social security
schemes and the importance that seniority pay assumes in China.
A few points propagated for USA and China are shared below:
USA

Scarce union trade presence and minimum government intervention


o Little regulation, both parties are allowed a lot of freedom to negotiate

State laws limited to minimum wages, dismissals, discrimination, equal opportunities, social
benefits, safety and health

Strict control of salary costs, not through state intervention but by linking these to individual or
group performance

Unegalitarian salaries with high difference based on performance, also driven by external market
conditions owing to strong competitiveness
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Special attention paid to levels of variable pay and incentives rather than fixed salary
o

Variable mix to be as high as 55% for white collar sales role

Performance based compensation is the main form of variable pay, mainly of two kinds:
o Bonus plan for the individual
o Profit sharing and gain sharing systems

Voluntary social benefits by the employer is the differentiator among preferred employers
o Paid time off work (holidays, leaves, free days)
o Insurance and medical benefits
o Pension schemes and saving plans

Mode of administering compensation and benefits is flexible, accompanied by informal policies


and procedures

China

Trade unions controlled by state


Loyalty is rewarded: tenure based compensation and promotions
Low pay differentials between jobs and levels
Fixed component is a major part of compensation
Compensation administration is centralized but not formalized

Doing Business in China Guide (2014) by ECOVIS further provides income tax slabs corresponding to
income ranges as well as contributions required for social security:
Employer to contribute 20% of base payroll to state sponsored retirement scheme
Employer to contribute to medical insurance fund, maternity insurance, unemployment insurance,
work-related injury insurance and housing
Total employer contribution can go up as high as upto 40% of employees monthly basic salary

Milkovich and Newman (2005 edition) in their book Compensation describe various benefit plans in
USA and related Acts, further supported by SHRMs GP-HR certification material on:

Legally required: Workers compensation, social security, unemployment insurance, Family and
Medical Leave Act (FMLA), Consolidated Omnibus Budget Reconciliation Act (COBRA),
Health Insurance Portability and Accountability Act (HIPAA)

Intermediate (IPC) Course Taxation Practice Manual, ICAI (2013) provided an in-depth view on taxation
implications on various salary components. Some examples are shared below:
1. Housing Rental Allowance (HRA): Exemption shall be available on the least of the following13

HRA received
Rent paid less 10% of basic pay
40% of basic pay (50% in case of Mumbai, Chennai, Delhi, Kolkata)

2. Transport: Rs. 800/- per month tax exemptible.


Thus, it is to be noted that a lot of the pay structures are dependent on the country tax practices, in terms
of what they exempt and promote through lesser or no tax implications and thiscould be one of the factors
that determine pay structure in a particular industry or country.
After reading through culture and country specific pay practices, the argument of global convergence of
these practices is paramount.

Charles H. Fay (2008) further highlights in his article on Moving towards Global Convergence in the
book Global Compensation: Foundations and Perspectives (Global HRM) as to how despite the cultural
differences, there is a convergence of compensation structures across countries due to internal forces of
similar organizational structures and expanding footprint of MNCs with expatriates being sent to run the
startups, as well as external forces of globalization and increased labour mobility.
Armstrong and Murlis (2004) of Hay Group in the book Reward Management: A Handbook of
Remuneration Strategy and Practice speak of the trends in Reward Management that are emerging
globallyEngaged Performance

Attaches importance to relational awards associated with work environment and learning and
development rather than transactional rewards
Aims at what employee values most in the shape of rewards: reputation of the organization,
recognition and communication in addition to growth & career advancement opportunities

Greater Realism about the Role of Reward

Pressing the lever of performance related pay is not sufficient for driving organizational success,
however it can be used as a tool to drive culture change

For example: In the GE case study done in Compensation & Reward Management course at IMI, pay of
CEOs got linked to target based performance instead of the erstwhile provision of equity options that led
to manipulation by business leaders in order to make short term gains at the cost of a volatile business
scenario
Job Evaluation

Written off in 1990s as irrelevant stating that the market rules, okay?
Flourishing in 2000s, although in support capacity rather than a driver for grade decisions
Driven by internal equity and equal pay considerations

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Equal Pay

Acts on Equal Opportunity Employment has increased pressure to introduce analytical job
evaluation but also to conduct equal pay reviews/audits. While organizations appear to be
reluctant but the pressure to do so will no doubt increase

Broadbanding

Two questions emerged in the 1990s and early 2000s regarding broadbanding:
o Whats the point of broadbands if they simply consist of spot rates?
The answer given by broadband devotees to this is that there is atleast some overall
structure within which spot rates could be managed.
o

Whats the difference between, say, a four-banded structure with three zones per band
and a 12 grade structure?
The answer to this was that as roles develop, movement between zones could be dealt
with more flexibly.
However, none of these arguments are particularly convincing and disillusion with the
broadbanding has increased since it has been found that it is harder to manage broadband
structure than narrow-graded structures despite the original claim that they would be
easier- they make considerable demands on line managers as well as HR. Broadbanding
can build employee expectations of significant pay opportunities, which tend to be
mismanaged rather than managed. It can be difficult to explain people how broadbanding
works and how it will affect them, and they may be concerned by the apparent lack of
structure and precision. Decisions in movements within bands can be harder to justify
objectively than in other types of grade and pay structures.

The trend is therefore for organizations to develop broad-graded structures, i.e. structures with 6
to 10 grades, which are managed in the same way as traditional narrow-graded structures using
reference points, zones and compa-ratios.

Career Job and Family Structures

One of the most significant developments is the use of career and job families.
o A career family structure is one in which separate job families are identified and defined
but a common grade and pay structure applies to all families. Job families may contain
separate market groups, each with its own graded pay structure but career family provides
an overall range.
o Thus career family structures define career paths between and within families, and
because this can be treated as an integrated approach to human resource management, it
is perhaps their most important feature.

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Contribution-related Pay

The concept of contribution-related pay was only introduced as an alternative to performancerelated or competence-related pay in 1999 by Duncan Brown and Michael Armstrong.
Contribution-related pay rewards people for both their inputs (competence) and their outputs
(performance). It does not simply concern itself with the achievement of objectives without
considering how they were achieved and how performance could be improved.
A further reason for its increasing popularity is that the term contribution resonates with people.
They feel that this is what working in organizations is all about- we are here to contribute to the
achievement of organizational and team objectives, not just to perform or display competence.

Flexible Benefits

For reward managers the question isnt should we or shouldnt we? but what should it look like
for us?
The theory of flex is to find out what employees want through surveys and employee relationship
management systems and to tailor rewards accordingly. However, there needs to be balance to
ensure that employee needs are aligned to employer values. For example, pension benefit is rarely
highly valued among young employees. Nevertheless, pension remains a core benefit with no
cash alternative or opt-out option because the message it gives is one of a responsible employer
thinking of the future welfare of its people.

Line Management Capability

More responsibility for pay decisions should be delegated to line managers. But in doing so, the
issue of capacity of line managers to make decisions fairly, consistently and in accordance with
policy guidelines has been questioned.
This means that in planning of reward initiatives it is essential to devote time in a programme for
educating and training line managers and to ensure that continuing guidance and help are
provided by HR as required.

Total Reward

Considers all aspects of reward as an integrated and coherent whole


Emerged in the 1990s as a means of maximizing the combined impact of the whole range of
reward initiatives on motivation, commitment and job engagement
Intangibles such as leadership style, workplace location and facilities included
Reward systems must be more flexible to effectively motivate diverse workforce

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Hay Group (2008) proposes a total rewards framework, as available on their website.This framework
takes strategy as a starting point, with considerations of both employee and organization needs, including
every cash and non-cash components. This is further tied to a strong implementation plan that translates
into bottom-line results.
World at Work (2007) also follows a similar total rewards model that ties in business strategy and culture
with cash and non-cash rewards, ultimately translating into results.

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Aon Hewitt in its report Total Rewards Survey (2007) covers greater depth in defining rewards as
everything an employee gets from the employer that they find rewarding i.e. compensation, benefits,
learning, development and environment.

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1.5 Theory
Compensation is defined as any form of payment made to an individual for services rendered as an
employee for an employer. Components of compensation can be defined by the 4 Dimension Model,
which divides compensation into base wage & salaries, add-on components such as allowances on base &
gratuity of salary, incentive payments and benefits.

The 4 Dimension Model

Compensation
System

Base Wage and


Salaries
Base pay

Wage and Salary


Add-Ons
Allowances such as
housing rental
allowance, dearness
allowance etc.

Incentive
Payments

Benefits and
Services

Short term
incentives (bonus)
& Long term
incentives (equity)

Insurance,
Retirement,
Severance Pay, Paid
leaves etc.

This is the classification that has been used further on in the project during documentation and analysis of
global compensation and benefits practices at Genpact.
Just as Incentive payments are classified as short term and long term incentives, Benefits and Services
can further be classified as:

Statutory: Provident Fund, Gratuity


Non statutory: Housing, Education
Fringe benefits: child care support, club membership, coupons and vouchers, company car etc.
Health/Accident Benefits: Insurance for self and dependents
Deferred benefits: Retirement
Professional development support

Further constructs for country-specific data were framed on the basis of studying Genpact Indias
Compensation Policy document, alongside documents pertaining Benefits, Reward programmes and Paid
leaves.
The following basic constructs were formed:

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Band 5

Band 4

Band 3

Band 2

Band 1

Comments

($x-$y)

($x)

($x-$y)

($x)

($x-$y)

($x)

($x-$y)

($x)

Salary ranges per band

($x-$y) included

Allowance (1) description


($x)

Allowance (2)
Allowance (3)

13th month pay/


Holiday bonus

(x%)

(x%)

(x%)

(x%)

(x%)

Paid in March annually

(y%)

(y%)

Only for Business


Development Roles

Mandated 100%
employer contribution

Employer contributionx%, employee


contribution- y%

Amount allocated for


Gold, Sliver & Bronze
awards

FIXED PAY
Base pay
Allowance (1)

VARIABLE PAY
Annual
performance
bonus
Variable
Incentive
Component
BENEFITS
Provident Fund

x% of base

Medical
Insurance

OTHER REWARDS
Other rewards &
recognition

Allowance (2) description


Allowance (3) description

Where Band 5A: Process Associate


Band 5
5B: Process Developer
4A: Management Trainees
4B: Assistant Manager
Band 4
4C: Manager
4D: Senior Manager
3: Assistant Vice President
2: Vice President
1: Vice President
0: Senior Vice President (excluded from scope of this project)

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The comments section for Benefits include details on whether the contributions are made by employer or
employee or both, and further analyzed based on their nature:

Defined benefit plans


Defined contribution plans
Defined Benefit Plan
1. Provides an explicit benefit which is easily
communicated
2. Company absorbs risk associated with
changes in inflation and interest rates which
affect cost
3. More favourable to long-service employees
4. Employer costs unknown
Source: Milkovich and Newman (2008)

Defined Contribution Plan


1. Unknown benefit level is difficult to
communicate
2. Employees assume these risks

3. More favourable to short-term employees


4. Employer costs known upfront

In addition, promotions and increment guidelines were also outlined in a detailed section of the
report.
Legal provisions for each of the components of compensation, benefits and other rewards were to
be studied and stated in a detailed document, especially for salary components with tax
exemptions or heavy tax implications. Apart from tax, certain social security contributions are
mandated and these are also to be captured under the Legal Provisions section.
In the end, a best market practices and upcoming changes section was also added in order to
report any changes that the regional office was considering and the best market practices
employed in their region for their labour markets.

Thus, a country-specific report was designed to look like this:


Table of Contents
Executive Summary
Compensation at Genpact Philippines
-

Components
Details and Legal provisions
Increment Guidelines
Promotion Guidelines

Benefits at Genpact Philippines


-

Components
Details and Legal provisions
Paid Leaves
Severance Pay

Rewards & Recognition Programs


Best Market Practices & Upcoming Changes

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From a global analysis perspective, the following construct was proposed:

Salary Components

Region

Basic
HRA
Medical
Cash Component

India

USA

Europe

Conveyance Allowance
Special Allowance
Location Allowance
Annual Performance Bonus
Variable Pay

Deferred Income Plan


Variable Incentive Compensation
401(k)

Retirement Benefits

Gratuity
PF
Personal Accident Insurance

Insurance

Life Insurance for self


Life insurance for upto 3 dependents
Car Lease

Other Benefits
Leased Accomodation

So far the theory applied for documentation and inter-country comparisons of Compensation & Benefits
practices.
The theory for analysis arose later once all the information was in place. It was observed that certain
allowances and benefits were mandated or driven by collective labour agreements, some other promoted
voluntarily or as a best practice. Thus, the extent to which these components could be altered varied in
degrees (i.e.
feasibility), due to which the
following
classifications were made:

The downward arrow depicts increasing extent to which benefits can be altered or restructured, with green
being most flexible and red being most rigid.
Post classification, the idea is to plot costs against these classifications of feasibility to get an ImpactFeasibility graph:
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In this figure, benefits that have high cost and high feasibility are least desirable and to that extent require
restructuring or alterations. Low cost with low/high feasibility is ideal in both cases, and high cost and
low feasibility (i.e. mandated or driven by collective labour agreements) cannot be changed and hence
remains status quo. A sample exhibit is viewable in the Results section.

1.6 Research Objectives

To document compensation and benefits structures and practices across offices and entities of
Genpact globally
To identify departures of other country pay systems from that of Genpact India and suggest
recommendations for standardization
To identify potential cost saving areas

1.7 Research Questions

What cash components fall under Fixed pay?


What cash components fall under Variable pay?
What non-cash and cash components fall under Benefits?
What are the policies for Paid leaves and Severance Pay?
For year on year increments, how is pay adjusted for inflation, merit increments and
promotions?
Of all these practices, which are mandated by local law and which are voluntary/best industry
practices/promoted by country tax practices?

1.8 Hypothesis

Benefits are potential cost saving areas

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Chapter 2: Method
2.1 Sample

Country offices with headcount greater than or equal to 100 employees were considered.
3 legal entities were considered, owing to their presence in important customer markets:
Capital Market Services, ITO and Jawood
Employee bands 1,2,3,4,5 were included
Fixed pay, variable pay, benefits, paid leaves, increments and severance pay were included

2.2 Measures (Interview Questionnaire):


Cash Component
1 What categories are included under cash pay?
2 Which of these components are dependent on basic pay?
3 Which of these components are most prone to change?
4 Are these in line with employee preferences? What are the employee preferences?
Variable Component
1 What categories are included under variable pay?
2 Which of these has been most effective in driving performance?
3 Which of these components are most prone to change?
4 Are these in line with employee preferences? What are the employee preferences?
Retirement Benefits
1 What categories are included under Retirement Benefits?
2 Which of these has been most effective in retaining employees/building goodwill?
3 Which of these components are most prone to change?
4 Are these in line with employee preferences? What are the employee preferences?
Insurance
1 What categories are included under Insurance?
2 Which of these has been most effective in building goodwill/forming an attractive EVP?
3 Which of these components are most prone to change?
4 Are these in line with employee preferences? What are the employee preferences?
Other Benefits
1 What categories are included under Other Benefits?
2 Which of these has been most effective in building goodwill/forming an attractive EVP?
3 Which of these components are most prone to change?
4 Are these in line with employee preferences? What are the employee preferences?
Major Concerns
1 What are the major concerns in designing C&B that you face as a compensation executive?
2 What are the major concerns in administering C&B that you face as a compensation executive?
3 Any other comments
Market & Employee Preferences
1 What are the best practices being followed in the industry by your competitors in both the labour and product market?
2 What compensation, benefits and reward practices are employees demanding in the market?

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2.3 Procedure (Data Collection)


The procedure for data collection was as follows:
1. Get introduced on Global Organization Announcement mail apprising global offices of the
project being taken up and that they will be contacted shortly
2. Introduce project purpose and requirements on call and discuss concerns that offices might have
3. Send a mail to each office separately requesting for existing documents as Step 1, including the
following:
a. Basic salary grid
b. Allowances
c. Variable pay documents (annual bonus, variable incentive documents)
d. Benefits documents
e. Paid Leave policies
f. Severance Pay policies
g. Increment policies
4. Inform them in this mail itself that Step 2 would include us getting on a call for clarifications and
including any pending information
5. Also send a sample output to show them how this will benefit them and how they can keep a copy
6. Track documents being received from 14 offices and send reminders through mail, escalation
mails or calls
7. Prepare a document together for each office and run through questionnaire checklist to identify
missing information
8. Schedule calls to address information gaps and gain clarity on existing information: Round 1
9. Send prepared documents for verification by offices
10. Initiate Round 2 of calls for information on costs of allowances and benefits as a percent of base
pay
11. Prepare a band-wise grid of pay provisions including costs and extent of restructuring possible
(where those mandated by law are most rigid and those practiced voluntary are most flexible)
12. Conduct cost-feasibility analysis for each country by plotting costs against extent of restructuring

A broad outline of identified processes for data collection are shown in the project timeline on the next
page.

25

7,9,10
Apr
Week
0

14Apr
Week
1

21Apr
Week
2

28Apr
Week
3

5-May
Week
4

12May
Week
5

19May
Week
6

26May
Week
7

Genpact Orientation
Department Orientation (India C&B
documents)
Define Scope of Project
Define timelines
Team Introduction
Announcement
Understanding material
requirements
Collating material available
within team
Global Team Call
Reach out for policy documents
Collate country-wise policy
documents
Draft Questionnaire
Set up calls with global teams
(Phase 1)
Collate findings
Set up calls with global teams
(Phase 2)
Collate findings
Final consolidation & review

Done

Work-in-progress

To be done

26

Chapter 3: Results & Discussion


3.1 Results
The figure below depicts results of the project in terms of its business impact:

27

As per project requirements, the following were the outputs:

Country-specific reports on compensation and benefits practices stating details and legal
provisions pertaining to fixed pay, variable pay, benefits, increments and severance pay

One-pager country profiles for quick comparison that entails provisions made to
employees band-wise, including costing details per band and classification of
components as rigid/flexible (i.e. mandated by law or voluntary). A sample exhibit is
provided on next page.

28

Impact-feasibility graphs that plot cost of pay component alongside its rigid/flexibe
nature. An exhibit it provided below.

29

Over and above this, my value addition included:

Cost analysis tool Heat Map: This tool colour codes costs in varying shades of green
yellow and red depending on degree of high spending. Visually, it aids analysis of where
costs are high at a glance. A sample exhibit is provided below.

In the exhibit above, it can be seen that Legal has the most number of reds in its column
and hence it is one of the most highly paid functions. Marketing and Communications has
the most pleasant shades of yellow and greens with barely any orange colourations and
hence, it is one of the lowest paid functions.

Global poster

A creative initiative undertaken to plot all countries on a map and mention the differentiating
nuances on stick-it notes.
A picture of the same is provided below.

30

3.2 Analysis & Implications:


While the results pertain to the companys internal data and cannot be disclosed, a broad outline
can be shared, as below:
Europe

Benefits were high cost as well as high feasibility in European nations i.e. they were not
mandated and were mostly best industry practices
In some European regions, allowances had a higher cost/base pay percentage, i.e. they
were costlier than benefits and while some of these were either mandated or for expats,
many others were best industry practices or promoted by country tax practices and to that
extent voluntary.
Collective labour agreements usually governed topics like paid leaves, retirement (in
countries where it wasnt mandated), disability insurance terms and even involved agebased increments in some cases

31

It was observed that in certain pockets of Europe, benefits were not non-cash components
and could infact be encashed by employees in the form of vouchers, coupons and tickets

US

In the US, paid leaves and retirement benefits were high on cost but low on feasibility
since employer value proposition in US determined by the number of voluntary benefits
it provides to its employees
In the US, it was found that acquired legal entities had similar structures but depending
on the nature of the business, there were certain differences with regards to negotiations
on wages and benefits

Latin America

Gautemala has highly regulated pay norms wherein 13th month bonus (payable in
December), 14th month bonus (payable in July) and monthly bonus (Q250 per month
across bands) are mandated by state. Even paid leaves and severance pay are predetermined by the state
Mexico is not as heavily regulated and follows a slightly different structure wherein
weekly bonus, shift bonus and production bonus are provided to certain bands of
employees

South Africa

Follows 3 salary structures owing to expatriates and acquired entities over and above
Genpacts existing pay structure

Asia

Social security contributions by employer are mandated in China and Philippines mainly.
13th month bonus is also provisioned in both these regions.
Singapore is more or less aligned to its Indian entity in structure although costs for
insurance are very high owing to expatriate packages which can now be changed due to
favourable local hiring opportunities

Globally, consolidating to include fewer insurance vendors would mean us giving them greater
bulk of clientele and hence greater discounts to the company.
3.3. Limitations

Japan, Brazil and Colombia not included in the study although they have headcount
greater than 100 owing to certain business exigencies in their respective regions
Other offices with headcount less than 100 are excluded: UAE, Australia, Morocco

32

Pay and benefit practices for Band 0 (Senior Vice President) were excluded from the
scope of the project
Equity options and retention bonuses were excluded from the scope of the project

3.4. Suggestion for future research

Multiple calls will have to be made in order to document more data. It is essential to ask
the right questions for best results and also to verify reports made with the office once
before finalizing it
It is also important to validate documents sent by offices since some of them could be
outdated and changes in policies may have been made in practice
Exclusions from current project scope can be included for further research

Chapter 4: Conclusion
Conclusions & Recommendations

Allowances and benefits are many and voluntary. They complicate the structure of pay in
Europe especially when certain benefits become encashable since that is a higher cost to
company
US entities are many and follow different structures. Standardization may help attain
greater centralization although business-specific nuances should be allowed to exist
Latin America pay provisions are heavily regulated in some countries but low cost
arbitrage still exists
South Africa follows three different salary structures but they do not differ greatly except
for one or two components
Benefits in China and Philippines have high rigidity since many of them are mandated.
India and Singapore are more flexible. Singapore has a number of allowances and
benefits for expatriates which are high cost and can be restructured since local hiring
conditions have become favourable

Note: Impact-feasibility graphs for each country and entity point out exactly which
component of pay is high cost and high feasibility (i.e. can be altered flexibly). Since that
data cannot be shared, the above recommendations are broad outlines of the same.

33

References
Global HRM (2008). Global Compensation: Foundations and Perspectives. Gerhart, Barry.
Routledge Publishing. p.547- 548.
Global HRM (2008). Global Compensation: Foundations and Perspectives. Sanchez, Mario
M. Routledge Publishing. p.15-20.
Global HRM (2008). Global Compensation: Foundations and Perspectives. Fay, Charles H.
Publishing. p. 131-132.
Board of studies (2013). Intermediate (IPC) Course Taxation Practice Manual. ICAI (2013). Pg 1518.

Milkovich, George and Newman, Jerry (2008). Compensation. Tata Mc Graw Hill. p. 137138.
Murlis, Helen and Armstrong, Michael (2008). Reward Management: A Handbook of Remuneration
Strategy and Practice. Hay Group. p. 591-600.

Wang, Lun and Pingwen, Hu (2014). Doing Business in China. ECOVIS.p. 32-34.

34

Appendix 1
Genpact growth story:

Tushman and Nadler Model on Genpact

Tasks are highly customer-centric


and operations oriented as a BPO
handles customers business
segment. Genpact follows a nearshoring model to overcome
language barriers and relate better
to customer culture

Culture is highly process driven


owing to the operational nature
of work. It also promotes
learning and mobility across
verticals.

People capabilities lie in the


areas of Finance & Accounting
and Analytics with a primary
focus on verticals of Retail,
Industrial Manufacturing and
BFSI

Genpact is structured by its


different service offerings that
horizontally cut across
industries and by its industry
verticals such as Retail, BFSI,
Life Sciences, to name a few.

35

Considerations for Tasks:

Does the work require specific knowledge or skill?


o Yes, it requires financial and accounting skills, analytic skills. While accounting skills are
similar across verticals, the skill levels of analytics vary across industry verticals, and
include econometrics and statistical modeling as a skill at higher analytical levels.

What are the intrinsic rewards involved in completing the work?


o While there is team recognition, there are also a number of recognition rewards given
such as the Cheers Program, where a boss can nominate his subordinate and award him
points ranging from a thank you note to a gift item that can be purchased on the Cheers
portal.

Is it mechanistic or creative?
o Tasks are creative since Genpact is currently in the Business Reengineering innovation
phase wherein existing client processes can be improved and made better, which although
follows a broad structure in terms of metrics and linkages of sub-processes, still it
encourages creativity on the whole.

How does the work flow?


o Work flows from client to Genpact teams, as all members of the team are highly
participative and apprised of client situation

What sort of approach is needed to do this work best? Quick? Thorough? Caring? Analytical?
Precise? Enthusiatic? ...
o Analytical approach is required to do this work best.

Where are the interdependencies?


o Tasks are closely aligned to Lean Six Sigma and Smart Enterprise Processes, frameworks
within which analytics is to be carried out.
o Tasks are also aligned to client requirements and expectations as Genpact values
customer-centricity very highly, to the extent that it has near shored its offices closer to
client locations to overcome language and cultural barriers and at the same time retain a
cost arbitrage. Thus, acquisitions have been made in Szcecin and Krakow (Poland),
Hungary and Netherlands to serve European clients.

Considerations for People:

36

Who interacts to get the work done? Bosses, employees, peers, external stakeholders.
o Bosses, employees and external stakeholders

What skills do the people possess? Knowledge, experience, education, competencies.


o For existing businesses: knowledge, education and competencies. Most people have
begun their careers here and have been here since the past 7+ years
o For new ventures: Experience and competencies to set up new business

Is there a demographic profile? Age, gender, ethnicity.


o 60% are males, 30-40 years, Indian

What are these people's preferences and expectations for compensation, reward, career
progression, recognition, and organizational commitment?
o Peoples expectations are of long term employment, but more importantly growth in the
organization through learning interventions such as certifications and cross rotation

Considerations for Organizational structure:

How is the company organized? Mechanistic or organic.


o Organic: work is driven by dynamic client requirements and the nature of business
process transformations requires a non-mechanistic skill set as well as fresh thought
o People move across several roles since analytics runs across several industrial verticals

Are there distinct business units or other separations? Regional, functional, by product, by market
o Functional horizontals and industrial verticals across geographies define business
segregations. Functional horizontals include Finance and Accounting, Analytics, Quality,
IT, Marketing/Communications while industry verticals include BFSIs, Retail, Life
Sciences, to name a few

How distinct and/or rigid are the lines of authority?


o Lines of authority are clearly delineated although the culture is open and hierarchy-less, a
Vice President will easily treat the team members as equals

How standardized is the work? (Rules, policies, procedures)


o Work is defined by very strong processes but we cannot say that it is standardized
because the company is expanding and work is not repetitive in nature. The processes
give a broad framework but allow enough flexibility

How is work measured and incentivized and rewarded?


o Work is measured through weekly deliverables, incentivized through formal and informal
recognition platforms, rewarded through greater work responsibility and promotions and
learning opportunities

37

Considerations for Culture:

What do people really do to get work done?


o They approach seniors for advice, spend more time cracking it, discuss their doubts and
plausible solutions

How does information flow around the organization?


o Information flows through a very strong informal grapevine, socialization and formal
mail announcements as well

What are the beliefs and values of individuals in the organization?


o Teamwork, creativity, openness, hard work, analytical mindset

What leadership style is adopted?


o Participative leadership, leaders are more of nurturers. They share information and make
efforts to develop their team members
Is there a political network in play?
o Since the culture is informal, there is bound to be a political network in terms of some
people forming closer bonds with some others. Yet people are open and expressive and
also receptive.

Thus, there is a high degree of congruence where organizational performance is driven by Genpact
customer-centric tasks, with an organization structure that promotes learning and aids Genpact in
innovation over and above honing the skill sets of finance & accounting and analytics.

SWOT Analysis

Strengths: Capabilities of Lean Six Sigma, Smart Enterprise Processes & Analytics
Weaknesses: Low pay master, competitors are established brand while it is a developing brand
Opportunities: Macroeconomic conditions in the West and Europe mean that clients are looking
for servicers abroad. Also, for Genpact India there are opportunities up the value chain as
traditional business outsourcing services move to nations with cheaper labour
Threats: Price war erupting through competitors, increasing costs and inflation reducing cost
arbitrage,

Porters 5 Forces

Bargaining power of customers: High

38

o
o

Genpact has various competitors in the BPO industry which is especially based on cost
arbitrage and thus customer has several options to consider
BPO industry firms offer same nature of services and switching cost is low, therefore,
customers can easily consider changing service providers

Bargaining power of suppliers: Low


o Skill differentiation between Genpact and its competitors are not notably visible, price is
the only comparative parameter which further reduces suppliers bargaining power

Threat of new entrants: Moderate


o A price war does not welcome new entrants as it is not sustainable in the long term, given
the inflation and rising costs of human labour in India. Also, the BPO industry in India is
fairly well established and has formed its networks. For a new firm to enter will be very
tough unless they come with a specialized skill set that is different from others, which is
not common to this industry
o However, there are no cost barriers to entry.

Threat of substitutes: Moderate


o GE began outsourcing, and GE started insourcing too, owing to rising fuel costs and
innovation bottlenecks. This is a trend which will take a while to catch on and in the
medium term the threat is moderate
o Since new entrants are substitutes in the BPO industry the threat is moderate. Once the
BPO industry matures to establish itself higher up the value chain, threat may infact
increase since the differentiator is no longer just price

39

Appendix 2: My Top 10 Learnings

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