Variable, pay hike make a comeback this Diwali

Salary-earners are seeing their pinched pockets bulging, as companies are untying their purse strings. Top IT companies such as TCS and Infosys are leading a revival of employee-centric HR policies in India Inc marked by high variable payouts, double-digit salary hikes and promotions, less than a year after the global meltdown forced them to slash salaries and freeze hiring.

Buoyed by signs of faster-than-expected economic recovery from India and elsewhere and a jump in demand, a clutch of companies across sectors including carmakers Maruti Suzuki, Tata Motors and Hyundai Motors are busy paying out variable bonuses ahead of Diwali.

Some others, like top white goods maker LG Electronics, biotech firm Avesthagen, consumer products company Dabur and private insurer Bharti AXA Life Insurance are rewarding select employees with salary hikes and promotions.

India Inc has turned its focus back on its people power as companies are looking to expand, encouraged by improved demand and enquiries, BSE Sensex more than doubling in just six months, and signs of faster-than-expected global recovery that made the International Monetary Fund up its forecast for world economic growth in 2010 to 3.1% from 2.5% predicted in July.

This is in stark contrast to just a year ago when the global recession that felled several global financial giants including Lehman Brothers hit India, forcing companies to shelve expansion plans, downsize operations, cut salaries and freeze recruitment.

“In the past 15 months, HR heads were not at all bothered about attrition. But now that several sectors are bouncing back to normalcy, poaching might see a rise. Hence, companies want to secure their talent pool with mid-term hikes and promotions,” said P Dwarkanath, Max India group director (human capital) and a former president of the National HRD Network.

The drive to please employees is most visible in the country’s $60-billion technology services sector that is seeing more business trickling in.

Worst-hit sectors may give hikes

"It is a people-driven industry. At a time when the sector is witnessing positive signs of recovery, such announcements become even more relevant for both the company and employees. This would not only help companies in retaining their existing talent, but attracting new talent as well," said Joy Nandi, client partner, global technology practice, with Delhi-based headhunting firm Korn/Ferry International.

Tata Consultancy Services, the largest IT exporter, for example, has restored variable pay it had cut earlier this year due to a drastic demand slump.

Its main rival Infosys Technologies plans to give higher variable pay for the second quarter, besides declaring salary hikes and promotions across levels in October.

The firm will increase the variable component of employee salary if its overall performance is up in the second quarter, said a company executive requesting anonymity. Infosys will announce its Q2 results on October 9.
TCS did not pay variables in the January-March quarter due to overall decline in performance, while Infosys cut its variable pay by up to 55% in the first quarter. The average variable component in both firms is 30% of an employee's total salary.

The third largest player, Wipro, did not cut any variable pay and will continue to give variable linked with performance, a company executive said. Earlier this month, Mahindra Satyam (erstwhile Satyam Computer Services) announced restoration of variable pay of its 28,000 employees. Satyam had held back variable payouts from April to trim costs as revenues were under pressure.

Zensar Technologies, which employs more than 5,000 people, has hiked salaries by 6.5% on an average on a selective basis, besides paying full variable to 95% of its employees, its CEO Ganesh Natarajan said. With the recovery in economy activating the job markets again, companies in other sectors too are promoting key performers and doling out 8-12% mid-year salary hikes.

Avesthagen, for example, is promoting employees "who have worked overtime during the recession and were loyal to us", according to Villoo Morawala-Patell, its founder and CMD. Similarly, LG Electronics has just promoted a select bunch of employees in the general manager level and gave them a mid-term hike, according to Y V Verma, its HR director. Bharti AXA Life Insurance's HR director Priya Ranjan said the insurer will hand out about 15% hike to some 20-odd employees later this month.

Also, several companies that had last year migrated from half-yearly appraisal cycle to one-year cycle due to the slowdown are returning to six-month appraisal cycle. "For companies who had given measly hikes or cut salaries, a mid-term appraisal provides an opportunity for salary correction," said E Balaji, CEO of executive search firm Ma Foi Management Consultants.

HR circles say the trend is seen in some of the erstwhile worst-hit sectors like real estate, stockbroking and mutual funds. Brokerage firm Angel Broking recently gave 8% hike to its top 5% talent base of 6,200 people.
DLF, the country's largest real estate firm, said it was yet to decide on a mid-term appraisal, while Kolkata-based Ambuja Realty chairman Harsh Neotia said the firm was evaluating it.

Dabur India, which had already hiked salaries in April and July this year, plans to undertake another round of salary correction in January next year. It will undertake mid-term appraisals this month, according to HR head A Sudhakar.

Tyremaker Ceat too plans to go in for mid-term appraisal confirming the fact that companies are no longer fighting shy when it comes to pay packets.