<p>Compensation is a key factor in an individual’s choice of career paths, particularly at the junior levels. As the year draws to a close, HR professionals around the world are united in facing compensation-related quandaries, particularly in terms of increments for the coming year. At the same time, with attrition rates still elevated across sectors, companies are struggling both to hire new talent and to retain existing employees. A recent India CHRO Forum session in Delhi, hosted as a free-wheeling peer-to-peer exchange, brought out learnings, perspectives and best practices on the issue. This paper summarises these discussions.</p><h2>Focus Areas: Compensation And Beyond</h2><p><em><strong>Evolving remuneration models</strong></em></p><p>Overall wage bills, which had been going up at ~15% a year over the last couple of years, are likely to grow at a slightly slower (12-13%) rate in 2023. At the same time, companies are rethinking their compensation structures. In place of the traditional, fixed-versus-variable components, many are exploring ‘hybrid’ models that bring in non-monetary benefits such as expanded insurance coverage, L&D opportunities and so on. In this regard, the Great Resignation may have created an excellent opportunity to rework pay structures. Companies are exploring new ways to retain their people without necessarily driving up salary costs. Specifically, a well-designed L&D programme can enable workers to upskill themselves, which then serves as a reason for them to stay on.</p><p><em><strong>Misaligned salaries</strong></em></p><p>Candidates frequently arrive for interviews with two or three offers in hand and expectations of a big hike. This leaves HR in a quandary as to whether to hire new employees at substantially higher salaries than their existing ones. Doing so can become a source of great dissonance within the organisation.</p><p><em><strong>Joining and deferred bonuses</strong></em></p><p>To attract top talent, many companies are offering lucrative joining bonuses. However, in some cases, they are also deferring pay outs and enforcing contracts that prevent people from leaving before a set time. While some businesses swear by this method, others strongly oppose it, questioning the need to delay payments to those who have already earned them. In general, deferred pay may be better-suited to the C-suite, where both the stakes and the potential rewards are highest.</p><p><em><strong>Aligning wage bills with revenue</strong></em></p><p>Business disruption has, in the last few years, caused top-line growth to turn volatile. Many companies are unable to justify large increases in wages from one year to the next. Previously, organisations would strive to boost their bottom-line by capping pay increases or linking it to per-head revenue. However, for some companies, so long as wage cost as a percentage of revenue is within a target range, they would prioritise employee needs.</p><p><em><strong>Changing socio-cultural norms</strong></em></p><p>With Millennials and Gen-Zs making up a growing portion of the workforce, socio-cultural norms at the workplace are shifting. Younger workers have different priorities from those of previous generations – many are less concerned with buying cars or property (which they can readily rent) but more interested in the experiences they can garner, at work and elsewhere. Many also prefer ‘work from anywhere’ or hybrid models to traditional, office-based work. This is forcing companies to rethink their work models, even if this means spending more to mitigate possible security risks arising from remote work.</p><p><em><strong>Rising demand, limited supply</strong></em></p><p>With the imperative for digitisation growing by the day, candidates who possess ‘hot skills’ such as data science and analytics have multiple offers in hand. In past years, candidates expected salary hikes of upwards of 25% for changing jobs. Today, however, some of the most sought-after skills can command increases of up to 300%. Further, as more companies set up GCCs in India, they face critical shortages of talent. All of this has shifted the balance of power from employers to employees.</p><p>No matter what companies do to retain talent, they are often unable to hold on to people for more than a few months. A part solution is to change one’s hiring practices. Rather than focusing on top performers from premier institutes, some companies are hiring from Tier-3 colleges. They invest in this talent, which helps build a moat around certain niche skills, at least for 2-3 years at a time. This strategy brings down personnel costs while also instilling a sense of loyalty among such workers.</p>
<p>Compensation is a key factor in an individual’s choice of career paths, particularly at the junior levels. As the year draws to a close, HR professionals around the world are united in facing compensation-related quandaries, particularly in terms of increments for the coming year. At the same time, with attrition rates still elevated across sectors, companies are struggling both to hire new talent and to retain existing employees. A recent India CHRO Forum session in Delhi, hosted as a free-wheeling peer-to-peer exchange, brought out learnings, perspectives and best practices on the issue. This paper summarises these discussions.</p><h2>Focus Areas: Compensation And Beyond</h2><p><em><strong>Evolving remuneration models</strong></em></p><p>Overall wage bills, which had been going up at ~15% a year over the last couple of years, are likely to grow at a slightly slower (12-13%) rate in 2023. At the same time, companies are rethinking their compensation structures. In place of the traditional, fixed-versus-variable components, many are exploring ‘hybrid’ models that bring in non-monetary benefits such as expanded insurance coverage, L&D opportunities and so on. In this regard, the Great Resignation may have created an excellent opportunity to rework pay structures. Companies are exploring new ways to retain their people without necessarily driving up salary costs. Specifically, a well-designed L&D programme can enable workers to upskill themselves, which then serves as a reason for them to stay on.</p><p><em><strong>Misaligned salaries</strong></em></p><p>Candidates frequently arrive for interviews with two or three offers in hand and expectations of a big hike. This leaves HR in a quandary as to whether to hire new employees at substantially higher salaries than their existing ones. Doing so can become a source of great dissonance within the organisation.</p><p><em><strong>Joining and deferred bonuses</strong></em></p><p>To attract top talent, many companies are offering lucrative joining bonuses. However, in some cases, they are also deferring pay outs and enforcing contracts that prevent people from leaving before a set time. While some businesses swear by this method, others strongly oppose it, questioning the need to delay payments to those who have already earned them. In general, deferred pay may be better-suited to the C-suite, where both the stakes and the potential rewards are highest.</p><p><em><strong>Aligning wage bills with revenue</strong></em></p><p>Business disruption has, in the last few years, caused top-line growth to turn volatile. Many companies are unable to justify large increases in wages from one year to the next. Previously, organisations would strive to boost their bottom-line by capping pay increases or linking it to per-head revenue. However, for some companies, so long as wage cost as a percentage of revenue is within a target range, they would prioritise employee needs.</p><p><em><strong>Changing socio-cultural norms</strong></em></p><p>With Millennials and Gen-Zs making up a growing portion of the workforce, socio-cultural norms at the workplace are shifting. Younger workers have different priorities from those of previous generations – many are less concerned with buying cars or property (which they can readily rent) but more interested in the experiences they can garner, at work and elsewhere. Many also prefer ‘work from anywhere’ or hybrid models to traditional, office-based work. This is forcing companies to rethink their work models, even if this means spending more to mitigate possible security risks arising from remote work.</p><p><em><strong>Rising demand, limited supply</strong></em></p><p>With the imperative for digitisation growing by the day, candidates who possess ‘hot skills’ such as data science and analytics have multiple offers in hand. In past years, candidates expected salary hikes of upwards of 25% for changing jobs. Today, however, some of the most sought-after skills can command increases of up to 300%. Further, as more companies set up GCCs in India, they face critical shortages of talent. All of this has shifted the balance of power from employers to employees.</p><p>No matter what companies do to retain talent, they are often unable to hold on to people for more than a few months. A part solution is to change one’s hiring practices. Rather than focusing on top performers from premier institutes, some companies are hiring from Tier-3 colleges. They invest in this talent, which helps build a moat around certain niche skills, at least for 2-3 years at a time. This strategy brings down personnel costs while also instilling a sense of loyalty among such workers.</p>
