The 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.
More than almost anything else, Covid’s impact will be felt in terms of liquidity and the consequent financial distress. Amidst all the chaos, the CFO will play a central role in stabilising the business and positioning it to thrive when conditions improve.
Sujit Vaidya shares his journey and the lessons learnt along the way
Today’s CFO has a multi-faceted role and is expected to be a performance leader, a steward of control, a catalyst of change, an operator of efficiency and a strategist of growth.
Adit Jain, Chairman and Editorial Director, IMA India
Covid-19 is unlike any other recent crisis. So far, it has killed many more people than SARS did, and this time, the recovery will not be V-shaped but far more hesitant.
Mark Oliver, Founder of MarkTwo Consulting
In today’s tough times, CXOs must not only captain the ‘organisational ship’ from a long-term strategic point of view, but in the short-term, ensure that the ship stays afloat.
Ramesh Venkat, Founder and Managing Partner, Fairwinds Asset Managers
India’s financial sector, which was already grappling with NPAs to the tune of 12-13% of assets before Covid-19 hit, is likely to see these ratios worsen in the coming months.
Gautam Khanna, CEO, PD Hinduja Hospital and Medical Research Centre
A crumbling economy, lengthy lockdowns, social distancing, a scramble to develop a vaccine, and varying perspectives on how to manage the crisis: there is much in common between today’s situation and the Spanish Flu of 1918, which killed millions.
Sandeep Chilana, Managing Partner, Chilana & Chilana Law Offices
The GST has remained a topic of debate and, in many cases, trauma compounded by frequent changes in tax rates, confusing and sometimes conflicting rules on input credit and the continuing threat of anti-profiteering action by the authorities.
Manish Sabharwal, Chairman and Co-founder of Teamlease Services
The Covid-19 crisis has unleashed mayhem on the world of business. While the initial response focussed on employee safety, supply chain disruptions and business continuity, the longer-term implications will be profound. Many companies have moved to complete, almost overnight, digital transformations that they may have been planning
Rajat Sethi, Advisor to the Chief Minister of Manipur and Senior Research Fellow, India Foundation
In managing a crisis like Covid, governments have no rule books to follow. In both scale and complexity, the challenge is unprecedented and the response must combine boldness and caution in equal parts. Narendra Modi’s government has imposed a strict, nationwide lockdown, which has been twice extended.
Richard Martin, Managing Director, IMA Asia
As Asia emerges from the shadow of Covid-19, there will be disparity in economic performance across the region. Some markets will count out stronger, others weaker. Over time, there will also be an economic and geopolitical ‘rebalancing’, not just within Asia, but between the region and the world at large.
Ananth Narayan, Associate Professor of Finance at SP Jain Institute of Management and Research
Unlike with the 2008-09 Global Financial Crisis (GFC), India entered the Covid-19 crisis on a weak footing. Growth was slowing, the fiscal position was precarious, a number of key sectors were distressed, as was the financial system.