Push the Brakes: Insights from IMA’s Compensation Survey

Adit JainThe national lockdown has been disruptive across industries and every facet of a company’s operation. Demand, revenues, production and margins have buckled over the last quarter. A lot of these concerns were discussed at IMA’s web-based Forum sessions, with valuable comments shared by participants. One issue everyone is grappling with is the policy on compensation, and we thought an appropriate approach to provide insights on this would be through a survey amongst our client constituency. As it happened, the survey received a sizeable response (over 300 companies) and consequently, it has been possible to present findings explicitly for various segments. These include break downs by 13 industry sectors, 3 ownership categories and 7 revenue bands. More interestingly, findings have been scrutinised from the perspective of a company’s ‘essentiality’ of service and the start of its financial year (e.g. April, January etc). Occasionally, compensation surveys lack the strength in response numbers to be statistically secure, but the findings of this survey are backed by sufficient responses in each sub-category.

Our survey clearly demonstrates that Covid has had a deep impact on bonuses, salaries and lay-offs. Whilst there are, justifiably, variations in HR strategies across company groupings – sector, size and ownership – two factors exert an outsized impact. First, their financial year and second, the ‘essentiality’ of their business, which influences both continuity of operations and demand. Companies with an April start are less likely to pay out bonuses as compared with those with a January-December year. Moreover, non-essential businesses are more liable to impose pay-cuts than those deemed essential. About 60% of the companies have either paid staff performance bonuses for the preceding year or intend to do so as per their normal schedules. Only a tiny share – 3% – will not pay anything. The others propose to defer payments. The average deferment is about 4 months with companies in financial services and IT deferring by more and those in the ITeS and logistics sectors deferring by less. Our survey report contains a detailed breakup of bonus deferments together with further analysis, based on company size, ownership, industry segments and other parameters.

Increments have been hurt by Covid, but not in equal measure across the board. Senior and mid-level managers have taken the brunt of it, with very few hikes and in fact salary cuts amongst the majority of respondents. About 60% of companies will give some salary hike to junior staff and blue-collar workers, but at rates much lower than previously planned. Cost reduction measures include pay cuts, adjusting entitled leave with the period of the lockdown, reducing gig workers, reduced working hours, retrenchments and furloughs. The report examines each of these parameters with percentage figures based on company size, industry sector and ownership. For instance, overall about 30% of respondents intend to implement pay cuts but when viewed by segment, the ratio varies from 40-45% for Indian companies and only 23% for foreign companies. Pay cuts are logically more severe at senior and middle levels with median reductions of between 20% and 30%. Banking, auto, chemicals and energy are some of the more affected industries.

The hiring outlook is understandably weak, with a complete freeze for a large fraction of respondents across all management layers. The auto and energy sectors are the worst off while the IT and ITeS sectors are relatively more sanguine. The report presents these and other findings in careful detail and in a manner that will support the HR function with market insights on the issues of compensation.