No small change this, variables may be paid in full for FY 18

The variable component of salaries is likely to be paid in full to employees in most sectors this appraisal season, marking a substantial improvement over FY17, according to personnel managers, recruiters and consultants, thanks to companies performing better amid an economic revival. Those benefitting will include workers in auto and auto ancillary, manufacturing, consulting and chemicals units besides pockets of the technology, banking and financial industries, they said.

Search firms such as Korn Ferry and Heidrick & Struggles, consultants like Aon Hewitt and Willis Towers Watson India and HR managers in at least six companies confirmed the trend. Variable pay is likely to be 100% and might exceed that for the year ended March 2018, they said. This compares with 60-80% last year. “There should not be adverse payouts this year as the performance of the auto sector has been good,” said Prince Augustin, executive vice-president, Mahindra & Mahindra.

Hindustan Zinc is also looking to do better this year. “The payout of bonus this year will be higher as compared to last year as organisations in the manufacturing sector have performed better,” said Dilip Pattanayak, head of HR.

“Variable payouts for 2017-18 would be closer to the target (100%) for a large number of firms,” said Arvind Usretay, director, rewards, Willis Towers Watson India. “Sentiment is overall positive across most sectors.”

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Navnit Singh, chairman and managing director for India, Korn Ferry International, said most companies will pay 100% or more of variable pay compared with 60-70% in the previous fiscal. This is partly because they have overcome effects of demonetisation and the rollout of the goods and services tax (GST) in July last year, experts said.

“The economy has generally picked up and there is a buzz of positivity in the marketplace,” said Singh. “Overall results have been more than decent. Most sectors have got over GST and demonetisation.”

Heidrick & Struggles’ India chairman and partner in charge, Arun Das Mahapatra, said he talks to clients in February every year to get a sense of performance appraisals. “This year, bonuses should be good. Most industries have crossed 100% this year (FY18) unlike last year (FY17) where it was about 80%,” said Mahapatra. He added that some sectors—auto, high-tech startups, large ecommerce companies, luxury goods and some consumer goods—may even see payouts of 120% or more… There is stability across most sectors. Most have done well in 2017-18.”

However, sectors such as real estate and telecom are exceptions and are likely to see lower variable pay. Telecom has been shedding workers and the ongoing merger of Vodafone India and Idea Cellular is likely to see even more job losses, ET reported on Monday. One consultant warned against excessive optimism in the sectors that are expected to be more generous.

“We feel bonus budgets should be somewhat better than the last fiscal,” said Navneet Rattan, industry lead, Aon Hewitt. “However, we do not see a strong rationale for it being significantly above target.”

The chemicals industry is one of the brightest sectors, according to preliminary research by HR consulting firm Mercer India. “Chemicals across the spectrum seem to have had a good year,” said a Mercer spokesperson.

BCG anticipates better variable pay. “Consulting sector has done well this year,” said Suresh Subudhi, partner and head of recruitment, BCG.

Clients of EMA Partners, another search firm, expect to increase variable pay. “We can expect at least 30% increase in variable component payout over last year,” said A Ramachandran, senior partner at EMA.

Source: Economic Times