Retention carrots leading to new millionaires

NEW DELHI: Employees in India Inc never had it so good. And we are not even talking about the better-than-ever salary hikes. With companies on expansion spree, deal street buzzing and M&As growing by the day, retention carrots such as cash bonuses, ESOPs, and cash-cum-stock payouts are creating a new breed of employee millionaires.

Some of the big ticket M&As that have resulted in mega buck pay-outs to employees in the recent times include Lowe, Mastek, Intelenet, Manpower, Grow talent and Gallup MBA, just to name a few.

Take the most recent case of ad agency Lowe. Last Friday, all permanent employees at the ad agency Lowe — from the managing director down to the peon — were laughing their way to the bank. The payout to some of the employees on account of 51% stake sale in the firm to global major, IPG, touched Rs 1 crore.

Similarly, early this month, when Mastek acquired Vector Insurance Services LLC for $9 mn, it doled out an additional 30% in bonuses to retain key four-five top people, apart from 10,000-20,000 shares each. All this to prevent them from exiting after acquisition by an unknown company.

“You need to retain key people to be sure about the company’s future performance,” says Sudhakar Ram, CMD, Mastek. “Services like ours can’t do without people, specially those who have been anchors in difficult times.” But Mastek put a lock-in period spreading the payout over four years.

The trend has been gaining momentum during the last two-three years. Employees are getting richer as the companies are gaining in scale through inorganic growth.

However, it is now common to see such payouts increasingly come with riders such as lock-in period for bonuses and payouts spread over a period. In some cases, retention bonuses are also being linked to performances. The better you perform, the more you are paid.