India, Inc. salaries get more variable

NEW DELHI: This may be a double-edged sword for employees of India, Inc. Variable pay, as a part of compensation, has gone up several notches across sectors. According to Hewitt’s Annual India Salary Increase Survey, the banking sector has seen the variable component going up from 13.5per cent to 23.3per cent, IT has seen an increase from 10.9per cent to 13.7per cent, manufacturing has seen variable pay move up from 11per cent to 16.2per cent and the FMCG sector has seen an increase from 13.3per cent to 16.5per cent.

While variable pay has become a popular tool among employers and HR people, it is a mixed blessing for employees. Larger variable pay components translate into lesser monthly pay cheques for employees, and often a large portion of the annual increment can be in the form of variable pay.

Nevertheless, variable pay is here to stay. Today, it’s no longer restricted to the so-called sunrise sectors and companies from the old economy fold are subscribing to it as well. Senior management is deciding the focus of the company, be it cost management, innovative sales or customer service, and are linking employees’ compensation to these goals.

This helps increase value proposition for the customer and the bottomline of the firm. “These are symptoms of a buoyant economy with variable pay being implemented across all levels of management and industries. Companies are looking at strategic methods to manage escalating salaries,”says Sandeep Chaudhary, practice leader, analytics consulting India & West Asia, Hewitt Associates.

Variable pay is being used to gauge employees’ confidence index and focus on training. Organisations are able to distinguish talent and retain critical performers and zero into employees, who need further augmentation of their skills through training.

“The scenario is now about performance orientation, but our job has become easier with no more ambiguities and quarrels at the end of the day,” says Manju Malkani, deputy general manager HRD, HDFC. The basic ingredient of a successful variable pay programme has to be a solid performance management system, which entails KRAs (key result areas) being set by the management and employees.