BRIGHT YEAR AHEAD!
Jobs and salary hikes await you in the year ahead. MoneyQuin brings its readers Ernst & Young’s forecast for 2010-11:
NS Rajan, Partner, National Head and EMEIA Leader – People &
Organization, Ernst & Young talks about jobs, salaries and hirings in the
year ahead:
Q: What is E&Ys forecast for India Inc's hiring trend for the FY
2010-11? What is the estimated percentage increase in hiring expected in the
new fiscal?
Rajan: The Indian job market seems
to be striking the right chord with the working population in the country as
more and more vacancies are being created and filled across sectors. Most
companies are doing away with the hiring freeze imposed during the economic
downturn.
Even though there is an ensuing euphoria over rising number of jobs, companies
are likely to approach hiring with caution due to the hard lesson learnt in the
past. In such scenario, piling on additional hiring costs can not only weaken
recovery but also slow down the newly found momentum.
While hiring will continue mostly to meet the replacement demand created as a
result of erstwhile hiring freeze, there are likely to be mixed trends in the
level of hiring activity across sectors. Based on a conservative stand,
percentage increase in hiring in the new fiscal can be between 10 – 15%.
All in all, companies are likely to do strategic workforce planning by keeping
in mind long term talent needs and not near term staffing needs. The focus
would be on hiring people who will stay on rather than those who switch jobs
frequently.
Q: In terms of salaries, what is the estimated salary hikes in percentage
for FY2010-11?
Rajan: Even though most of the
employers are looking forward to give away close to double digit increments in
the coming year, the Indian corporate is likely to follow a cautious approach
of keeping tight monitoring and controlling of any additional salary costs.
Smart companies recognize the difference between goings from a binge mode to a
crash diet as compared to working out a long term focused stay-fit program
which is what is essential to make them resilient.
The slowdown has helped in bringing about the much needed correction in
salaries especially at the top management level. Most corporates are expecting
higher attrition levels over the next few months on account of jobs coming back
into economy resulting in increments being used as a tool to retain talent.
At an overall level, extraordinary jump in increments does not seem probable
and the average salary increase is likely to be in the range of 9 – 12 %.
Q: Which sectors are expected to fare the best in terms of hiring and
salary hikes? some percentages?
Rajan: It is evident that most of
the sectors are on the recovery path. Though hiring has picked up in the
economy across sectors like pharmaceutical, chemical, auto/auto components,
insurance, education, retail and IT, it is unlikely that the bullish hiring trends
of 2007 will be restored within the next one year. The telecom growth story
would continue in the year 2010 and hiring activity in this sector is likely to
be in excess of 1,00,000 jobs. Some other sectors that are likely to lead
hiring in 2010 include pharmaceuticals , FMCG and education as these sectors
are facing a talent crunch at present.
In sectors like auto/auto- component, BFSI, real estate the hiring activity is
on the rise to primarily fill in vacancies resulting from significant
downsizing in the past and to meet future expansion plans.
In spite of excitement surrounding economic recovery, the average salary hikes
across sectors would be somewhat conservative. While on one hand pharma and
FMCG companies will lead the space with increments in the range of 10 – 13 %,
the IT and technology companies will give reasonable increments close to 8%.
Telecom sector will give above average salary hikes in the range of 12 – 15%.
BFSI sector will have maximum disparity in terms of future increment levels compared
with current ones, with projected salary hikes being in the range of 10 – 12%
as against nil during the downturn.
While the sentiment is optimistic across sectors, it will be a while before the
economy returns to the boom phase of 2007. Each step will be taken with ample
thought and precaution to ensure that mistakes of the past are not repeated
again.
Q: In terms of total remuneration, how much would be the weighted on
performance based incentives and bonuses? Will cash incentives be preferred
over long term-incentives or otherwise?
Rajan: A bad spell like a recession
indeed has a silver lining too; often it helps organizations to get back to the
first principles which get ignored during growth frenzy. The all critical link
between performance and rewards is back in right earnest.
We are likely to see a lot of innovation in designing compensation packages as there will be a stronger linkage to pay for performance. Individual performance, coupled with company performance will be the most commonly used criterion for determining performance bonus. Across levels, variable pay component of compensation packages is likely to go up. There would also be variation in payouts of performance-related bonuses being annually, half-yearly, quarterly or monthly payouts
At the senior management level compensation packages will be linked to the company’s performance. There will be a renewed focus towards balancing out executive compensation through a focus on retention and reward. A more holistic approach to performance metric selection and leveraging short and long term compensation elements will be taken. For this level in particular, employee stock option plans will make a comeback as a long term incentive for retaining talent. Most of the listed organizations will need to rethink the relationship between risk and reward to ensure that rewards reflect sustainable performance results and at the same time do not encourage excessive risk taking.
Performance levels will matter the most as companies have lesser cash and are risk averse. For the middle management layer organizations will establish talent management systems and processes to selectively reward for performance. Thus employees with high potential and superior performance or with specialized domain knowledge are likely to get higher increments.
At the junior management level, the in hand compensation would be largely governed by market practices and retention.
Q: When do
you expect the pay levels of executives and annual salary increments return to
2007 levels?
Rajan: Employees, as much as
companies, are clearly recognizing that reveling in rear view mirror glory of
past highs is insufficient on the drive ahead. In the absolute sense, it seems
highly unlikely that we would be returning to the peaks that compensation
reached till an economic boom phase is experienced for a few years at a
stretch, creating a skew in terms of demand supply equation of talent. On the
other top-notch talent will continue to exhibit characteristics of inelasticity
and companies would pay at previous peaks to attract them.
If the year 2007 was one of excesses, 2010 will be marked by cautious approach to rewarding talent. Salary levels would be a multiple of industry performance, company performance and individual performance. Continued cost cut pressures- especially in manufacturing and export oriented companies- will ensure that high increases are not a probability for average performers in the near-term. Further, fast growing entrepreneur led Indian companies, in a bid to attract world-class talent and expertise, are likely to pay more competitively than MNCs. The job market is finally looking up after a long, gloomy period and several companies across sectors have already started giving out mid-year/ quarterly bonuses.
Overall the concept of Total Rewards seem to be finding currency in the changing landscape, where a employee value proposition is viewed on a more holistic scale encompassing what an organization can offer, be it the organizational ethos, its leadership, employer brand, the intrinsic culture, nature of work and compensation . Hence compensation by itself is being viewed as an insufficient differentiator, and organizational imperatives will continue to dampen the prospect of salary increase going out of control. There is increasing recognition for the power of psychic incomes and the need to value intangibles in creating a compelling proposition. Companies will continue to consolidate their total reward philosophy towards a high performance orientation while at the same time will not shy away from top market positioning for its critical talent.
