COMPENSATION

The grass is getting greener

There is good cheer in the salary sweepstakes. Will 2005 be better?

Madhumita Chakraborty

  Whether India was shining or not, 2004 was a good year for the Indian professional. Transnational human resources consultants like Hewitt Associates and Watson Wyatt have hard numbers to show for the Indian techies’ glorious ride.

In the first five years since Hewitt Associates began mapping compensation levels in India in 1997, the overall percentage growth in corporate sector salaries and emoluments had moved on a downward curve, says Aditya Kohli. The jinx was broken in 2002 (after that bleak phase, post September 11, when the new economy driven boom turned into new economy driven gloom, and the laid-off geek was everyone’s guy next door.)

Salaries have begun rising only from the end of 2003, says Anita Ramachandran at Cerebrus Consultants, “In fact 2002 salary increases were lowest due to the fallout of 2001. Even 2003 increases which happened in April were on the lower side.” Mr Rajeeva Kumar, executive dirctor (HR and compensation consulting division) of OMAM Consultants, says overall salary levels had been increasing till 1998, when the percentage hike in pay year on year, began to decline.

Upward curve
On the threshold of 2005, the corporate compensation curve strongly resembles a smile, beginning with the steady, downward glide in salary increases since 1997, the plateau around 2000 and 2001 and the happy upward curvature since 2002. Hewitt Associates, which projects a marginal increase in salaries in the Asia Pacific region in 2004, has been gungho about India. Of the 991 companies it surveyed in the region between July and September 2003 (encompassing locally-owned, foreign and joint venture enterprises), the largest average overall salary increases were for India, followed by Korea, the Philippines and China.

Generally, says Sanjay Bharwani, country manager, Watson Wyatt India, “service sector professionals, including consultants) pay packages in India are comparable regionally, even higher than some of the ASEAN countries. This is a known fact to people within the service sectors.” And thereby hangs a tale.

The “skill sets” in question, could be marketing acumen, which are prompting telecommunications and information technology (IT) companies to recruit marketing professionals from the fast moving consumer goods (FMCG) companies or for geeks.

Ms Ramachandran says that is how the job market moves anyway. “In any market including India,” she says, “salary levels are always a reflection of supply-demand gap and the general economic standard of living. In a country like India, the supply-demand gap comes not only from the growth of domestic sector but also the extent of migration overseas.”

New areas
Information technology companies like Tata Consultancy Services (TCS) seem to be distributing their earnings, because net profits are growing in tandem with compensation levels of employees. In the year gone by, TCS found its total earnings catapult 18.8 % and its employee cost jump 21.2%. The phenomenal growth of the telecommunications industry reflects in salaries of electronics engineers too, particularly “those network guys”. The story does not get replayed in manufacturing or processing industries, though.

The FMCG business of Dabur India pushed the company’s sales turnover up by 9.5 %, but its expenditure on salaries, wages and directors’ remuneration increased just marginally to Rs 5.28 crore, from Rs 4.34 crore. Energy behemoth Indian Oil Corporation saw its turnover jump 8.6% last year, despite the long reign of high crude oil prices (its basic input). The company spent just a wee bit more on employees in the 2003-2004 fiscal, than it did the year before.

Compensation levels, are predictably shooting through the roof in people-driven industries, particularly where people rather than products, bring home the bacon. In the Hewitt salary increase survey, compensation levels out pace industry averages in information technology (IT), information technology enabled services (ITES) and telecommunication, media and entertainment companies.

“I think,” says Mr Bharwani at Watson Wyat, “commonsense would beckon for the high performers to be paid higher than the lower performers because they bring home the bacon.”

“The performance divide,” says Aditya Kohli at Hewitt Associates’ Gurgaon office, “is getting more stark every day.” Tata Consultancy Services executive vice president and head, Global HRD, S. Padmanabhan, corroborates the industry trend to move towards performance linked benefits in compensation packages. At TCS, the performance divide accounts for the 5% difference in salary hikes, distributed as variable pay between those who got variable pay linked to performance and those who simply got a share of the distribution of profits.

“The industry,” says Reliance group president (HR) V V Bhat, “claims to be moving towards a trend, in which 40% of compensation is made up of variable pay. I dont agree with this.” “Unless you convert performance into measurable units, how can you have performance linked benefits?” asks he.

Mr Kumar at OMAM Consultants, predicts that in 2005, good performers (the beneficiaries of the variable pay elements) should go laughing home with wallets that were at least 18% to 19% plumper.