Diwali bonus, R.I.P?

Aesha Datta
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Diwali may maybe a little lacklustre as corporates across sectors are doing with the earlier trend of giving a bonus before the festival. — MOHAMMED YOUSUF
Diwali may maybe a little lacklustre as corporates across sectors are doing with the earlier trend of giving a bonus before the festival. — MOHAMMED YOUSUF

Diwali, which was traditionally flavoured with sweets, card-parties and, most importantly, a fatter paycheck, may not see employees’ faces lighting up as most corporate houses are doing away with the sweet taste of bonus.

Private and public sector companies alike are fast moving away from a fixed bonus paid during the festive season, to benefits linked to individual performance.

With performance-linked pay-outs worked into the compensation package, the ‘extra’ is often paid out every quarter, or even monthly. Which means there is no single payout waiting around Diwali.

Push on merit

Pankaj Bansal, Co-founder and Chief Executive Officer of human resources outsourcing company PeopleStrong, explained that corporates across the world have been using three models to incentivise employees — bonuses paid to fulfill legal obligations, benefits paid on the basis of local customs and culture, and real performance-related bonus.

“The first one (legal pay) is almost redundant, the second one based on cultural norms has been converted into gifts and parties, and the third has superseded. The corporate world has become very meritocratic,” he said.

He added that while bonuses may have shrunk, Diwali parties and gifts to employees have seen a jump.

This trend of incentivising the cream of the staff, and not across the board, is all pervasive and even the companies in the traditional segments, such as manufacturing, are doing away with this custom.

“It reflects the maturity of the economy,” Bansal said, adding that the labour market is increasingly becoming competitive and it makes more sense for companies to give bonus to the best staff.

He further said that the problem with giving a specific Diwali bonus is that all employees expect to be paid a sum, which is usually one month’s salary, making it difficult to link it to performance.

Performance pay

However, to cushion employees from the sudden shock of not receiving a special ‘Diwali bonus’, companies have started timing the incentives to coincide with the festive season.

“We get incentives during the festival period. However, the bonus is also performance-linked,” said Dimple Bharadwaj, Deputy General Manager, Raheja Developers.

Even the guidelines governing the State-run companies, such as Oil and Natural Gas Corporation (ONGC) and MMTC Ltd, have done away with the seasonal bonus.

A senior official of ONGC said that they give employees performance related pay, which varies from person to person.

The official added that coincidentally this year, a percentage of the incentive has been paid during the festive season, while the remainder would be paid later in the year, most probably by December-end.

Coincide with festivity

Rajender Prasad, General Manager of MMTC, added that while the bonus scheme has been replaced by performance incentive, the chunk of the sum is still paid to overlap the festive season, which is quickly followed by the marriage season. “Whatever form of incentive companies pay, it is usually paid before the Puja.”

Bansal said that most companies are likely to even move away from paying performance incentives during this period, with a number of companies already starting giving the bonus during November or later. He also said that companies see more benefit in giving performance-linked pay, since these are seen to give the staff a better kick and motivate them to work more efficiently.

Says Alok Bharadwaj, Senior Vice President, Canon India, “We have two bonuses. For sales staff, it is performance linked. The other bonus is tied to the company’s performance, which everyone gets. Even there, the star performers get the highest while the rest is divided among rest”.

Budget cut

According to a recent survey conducted by the Associated Chambers of Commerce and Industry of India (Assocham), this year corporates are cutting back on their Diwali gifting budgets by a massive 45-50 per cent on the back of rising costs and lower earnings.

In stark contrast, India Inc had spent as much as Rs 2,000 crore on Diwali gifts in 2009, bang in the middle of the economic recession. The budget increased by a whopping 60 per cent in 2010, to touch Rs 3,200 crore, the study said.

(This article was published on November 8, 2012)
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