Variable payouts likely to be higher this year

Sindhu Hariharan, TNN | Jan 31, 2015, 03.56PM IST

CHENNAI: Looks like it is `acche din' for the salaried class, more so for those categorized as high performers.

With appraisal season looming over the employee fraternity, early signs from HR practitioners suggest an increase in variable payouts (performance bonuses) this year, on the back of improved business sentiment and need for talent retention amid fierce talent war.

The Hay Group Compensation Report (covering 415 organizations) expects industries like FMCG, retail and chemicals to roll out annual short term variable pay at high figures (14.5%, 14% and 14.4% respectively) and other industries like industrial goods and transportation following them at 11.8% and 9.1% respectively.

Like the past two years, variable pay as a percentage of total CTC has been on the increase across the corporate ladder, clocking at 10.7% at the junior level, 13.5% for the middle manager, and almost 18.1% for senior management, the report said.

GlobalHunt, an executive search firm, anticipates that variable payouts made this March, across industries, may be 10-15% higher than last year's levels and their optimism higher about the amounts shelled out for high performers.

"The high performers who were getting around 30% in the past years may see their variable pay going to almost 40%," Sunil Goel, director at GlobalHunt, said.

Goel attributes this upswing to talent shortage and improved business sentiment overall.

Some others expect marginal increase in variable pay this year over last year. Ashok Reddy, MD and co-founder of TeamLease Services, offered a broad-based estimate of variable pay outs and said that it may be around 15% of CTC for those employees who were paid at the rate of 8-12% during last year's difficult economic outlook.

Global consultant Mercer said that the first half of 2014-15 saw a fairly muted business performance and the positive sentiment began to kick in only around October. Accordingly, they do not expect any major change in the total bonus pool of March 2015 compared to the March 2014 payout.

"We expect the payments to be around 10% (both target and actual) at lower levels and 18-20% actuals for 20-30% target pay outs at senior levels," said Shanthi Naresh, India business leader, Talent Consulting and Information Solutions at Mercer.

Interestingly, Naresh expects a redistribution of the overall bonus pool in favour of high performers due to retention pressures. She said that certain `high performers' may find their actual pay outs to be as high as twice the target bonus.

Staffing firm Randstad expects pay outs to be generous this year for high performers. Aditya Narayan Mishra, president of staffing at Randstad India anticipates India Inc to be generous in their variable pay purely on the back of improved economic outlook, specially to incentivize those who have displayed high performance.

"On an overall basis, the variable portion of the employee benefits will be marginally higher by 5-10% across sectors though companies will differentiate sharply among employee levels," Aditya said.

There seems to be consensus among consultants that technology-linked sectors like Information Technology (IT) and e-commerce will go out of the way to keep employees satisfied owing to improved global demand and to retain them to support their growth story.

"While fast moving consumer goods (FMCG), technology and retail will over shoot their target variable pay; employees of sectors which are under turbulence like auto and telecom may witness subdued payments being doled out," TS Krishna Kumar, COO of IKYA Human Capital Solutions said.

He added that within the total bonus kitty, there will be a substantial gap between high performers and average-rating holders. "India story is gathering pace and this is just the beginning of the growth phase," said Krishna Kumar.