India Inc. Prepares for a Long Innings
While life sciences has consistently given out one of the highest salary increases in the last five years, it is interesting to note that industries like telecom, retail and financial institutions that have traditionally given high increases, no longer feature in the top 10. And there are a few reasons which explain that on the back of buoyant growth and high increases in the past, their fixed pay continues to be higher in relation to the other industries; the business performance still continues to be largely difficult on an overall basis and the need to be more judicious in payout continues to be high.
The Match Winners Who Matter
Pay for performance is not a clichéd jargon anymore. Over the years, India Inc. has moved from a socialistic view with limited differentiation based on performance; to a stage, where organizations have rigorously followed the bell curve principles. India Inc.'s performance distribution curve today is very different from what it was earlier. Employee distribution has become significantly sharper since 2007. Almost 68% of the population falls under the 'meets expectation and below' category. This proportion has increased by approximately ~20% since 2012. In the last five years, the percentage of employees with top performance rating has dropped by close to 30%, implying that organizations are not hesitating to differentiate sharply on the basis of performance and are allocating the share of the total increase budget accordingly
An increasing percentage of employees moving away from the top 2 ratings, shows how invested firms are today ensuring that they recognize true performance. Even though firms have reported that they have increased their C&B budget, a significant proportion of this increased budget is to reward high performance. A stricter performance curve only assists this process. Since many firms today are able to differentiate higher performance and potential, their ability to drive this pay for performance is sharper. The people who make a difference and are the real match winners get rewarded commensurately; the rest of the team has to earn their stripes and there are no free loaders anymore. Is the Divide Increasing? Top performers in India will get almost 1.6 times of what their colleagues will get for being solid citizens. Amongst all industries, financial institutions is giving out the highest differentiation at 1.8 times. Life sciences, consumer product, telecom and ITeS are a close second at 1.7 times. While financial institutions leads the pack, it is interesting to note that industries like life sciences are also making the cut as top differentiators. Other industries like telecom and consumer products have continued rewarding high performance. Junior management is gaining the most due to this stark differentiation. At this level, the top performers receive almost 1.6 times, whereas the top and middle management gets ~1.5 times.
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