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What drives your pay-packet

While performance is often cited as the main driver for a pay increase–or lack of it –salaries live in a more complex environment, writes Ruchi Hajela.

india Updated: Feb 26, 2008 01:54 IST
Ruchi Hajela

Money, so they say
Is the root of all evil today
But if you ask for a raise
It’s no surprise that they’re
Giving none away…

So sang British rock band Pink Floyd in the 1970s. It must ring true for many employees even today, as the country’s corporate sector workers ready to see what a new financial year has in store for them. March is for appraisals and reviews and April is for pay hikes.

Appraisal time is round the corner and it’s only human to look forward to a good hike. While there’s no getting around working hard, there are other factors that influence your increment as well. It is wise for employees to know that.

“A salary hike largely depends on an individual’s performance, his skills and knowledge and the scope and impact of his job,” says Sandeep Chaudhary, Business leader, Hewitt Rewards Consulting Practice, India. Companies may have different policies for appraisal but a performer needn’t worry. “Organisations have differing incentive, bonus schemes and even salary break-ups but at the end of the day everything boils down to one’s performance on the job,” E Balaji, Chief Operating Officer, Ma Foi Management Consultants Limited, told Hindustan Times.

Human Resource professionals in many companies agree. “In Accenture, salary hikes are primarily linked to the performance of an employee, where performance is assessed based on an individual or team’s contribution or on a business unit’s results,” Sandeep Arora, Managing Director, Accenture Delivery Centres for Technology, India told Hindustan Times. He added that employees who are aware of a performance pay plan not only show better individual performance but also can explain it to their colleagues.

Performance, in fact, is more important than just the number of years of experience, experts say. “A better qualified and a better performing candidate might walk away with a much higher increment when compared with someone with higher levels of experience but relatively lower on qualification or performance,” says Rajesh A R, vice-president at staffing firm TeamLease Services.

Other than your performance, a demand and supply gap of talent also affects how you would be compensated. “Many sectors are faced with a shortage of talent, which has resulted in a war for talent between organisations, with pay hikes being used as a mighty weapon,” says Balaji. He adds, “Organisations try to lure talent with attractive pay packages and an employee-friendly salary break-up.”

Money is still a key driver. A recent survey on salary projections released by Hewitt Consulting India reveals that about 76.1 per cent quit their existing jobs due to higher compensation offered by other companies.

Considering the fact that companies within the same industry are fighting for the same talent pool, a company has to benchmark its compensation with what others within the same and adjoining industries are offering. “External market and market inflation also affect compensation,” says Hewitt’s Chaudhary.

For instance, a recent report released by industry chamber Assocham based on the third quarter results of top IT companies revealed that these companies have reduced the average growth rate of their wage costs to half as compared to the previous year. Very clearly, the appreciating value of the rupee has been the external factor that has led to this in key export-oriented industries like IT and IT-enabled services.

A salary hike also depends on a company’s performance in the year gone by and its growth plans for the future. “If a company has not done well and doesn’t have great plans for the coming year, it won’t focus much on employee compensation. However, if a company hasn’t done well but has a long way to go in the coming year it will be more aggressive on the compensation front,” explains Naresh Malhan, Managing Director, Manpower India.

While there is no denying that money is the most obvious factor that indicates your worth to the company, don’t lose heart in case you don’t get the hike you are expecting. Retaining their talent pool and at the same time keeping HR costs low is a constant challenge for HR managers who are looking beyond money to keep employees motivated to stay on. “In my opinion salary hike contributes to not more than one-fourth in retaining employees and factors such as a company’s consistency, the work culture, how an individual’s contributions are recognised and how much personal interest the organisation takes in people are also important to retain employees,” Malhan said.

Other than frills like a swanky office and a fat pay packet, subconscious needs like job satisfaction and enjoying one’s work are crucial. “The biggest downside of focusing only on salary hikes is being short sighted about career prospects that are better in the long run,” says Rajesh. Experts are of the view that money becomes secondary as one rises up the ladder and looks for more satisfying factors at work–such as self-esteem and self-actualisation. So, while money is a big motivator for you to work, it shouldn’t be the end of you.