The Hindu Business Line : ‘Variable pay helps when people stay’

Variable pay pays off when companies have stabilised their employee population, and when they can target what people can do, control their behaviours and actions.

Anjali Prayag

Bangalore, March 8 Though variable pay programmes are catching up across all sectors in Asia’s two dynamic economies, organisations in India and China are restricted by high employee turnover rates.

Companies need to sort out issues of retention before tackling issues of productivity in these economies, says Mr Paul E. Platten, Vice-President, Global Practice Director, Human Capital Group, Watson Wyatt & Co, a global human resource consulting firm. People in these two countries are moving so fast that “by the time you design a pay programme, a lot of them would have left the employers.”

New compensation trend

Variable pay pays off when companies have stabilised their employee population, and when they can target what people can do, control their behaviours and actions. A new compensation trend that’s popular in the US and Europe and would suit Indian companies is the concept of lifestyle accounts, recommends Mr Platten. This variable pay structure targets employees in companies with specific demographics and skill sets.

The HR tracks lifestyles of its employees and plans to compensate them at critical stages in their life. “For instance, we have found that the first year, the seventh year and the 17th or 18th year of an employee is critical because of lifestyle changes at these stages of their lives. We advise companies to target different deferred benefits that employees can benefit at these stages,” explains Mr Platten.

Retention plans

In India, almost 80 per cent of the companies across all sectors, including PSU banks and insurance firms are looking at creative ways of combining retention plans with variable pay programmes, according to Ms Anita Belani, Country Head, Watson Wyatt India. Structures of compensations are driven by tax efficient plans that include cash-linked benefits, incentive programmes and deferred income plans.

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