Retail finds merit in Esops

The finance minister’s decision to tax employee stock option plan (Esop) as a fringe benefit may have made it less attractive for companies to reward their top performers. But for companies in the retail sector, which are currently seeing the worst attrition levels, Esops may still work out to be the most effective way of holding back talent. A recent entrant is Provogue India. Its Esop committee is in place and is expected to formulate the structure shortly. Provogue promoter Salil Chaturvedi said, “Besides controlling attrition, Esops help in aligning the interest of the managers with those of the owners. Whatever be the outcome of FBT on Esops, I feel Esops are worthy of investment in our human resources.”

Reliance Retail is using Esops as a bait not only to lure talent but also fight competition. The initial structure did not find favour with the employees who felt some of the clauses were restrictive. But the issue has been resolved after some changes were accepted by the management. The Rs 35,000-crore retail sector, which employs over 1,50,000 people, is yet to be accorded an industry status, which would entitle companies to tax exemptions under certain sections.

With the retail sector getting more organised and an ever increasing number of players entering the fray, demand for skilled manpower has seen salaries hit the roof. Industry sources estimate nearly 40% of the workforce has changed jobs in the last one year. And this figure is expected to rise to by 50% this year. While the churn at the middle and senior management levels have been relatively lower, the turnover at the front-end or the customer service level has been endemic.

Shoppers’ Stop, Future Group and Piramyd Retail were the early entrants to have realised the ‘pull’ force of Esops. Shoppers’ Stop had issued 10,00,000 stock options to more than 70 of its associates at a price benchmarked to the six monthly BSE Price. Even if smaller number of shares are issued it works very well, when both the company as well as the stock markets are doing well.

Companies are trying to look beyond Esops to keep their flock together. Managing an employee strength of 2,800, Govind Shrikhande, Customer Care Associate & CEO, Shoppers’ Stop, said the company has “various certification programmes along with enough empowerment and wealth creation opportunities that helps create stronger bonding and loyalty in the workforce even in the toughest competition.” “The process of counselling both on personal and career-related issues are addressed with compassion and in a forthright manner,” says Trevor Rodrigues, HR head of Piramyd Retail.

A fat package, incentives, and even performance linked growth options are falling short of controlling attrition, and companies are hoping that Esops might be the answer. Although the fringe benefit tax would have a bearing on the cash flows but better clarity would come once the government issues tax calculation details. supriya.verma@timesgroup.com