Gone are the days when the companies shied away from disclosing the real reasons for laying off their staff. Today, they are getting more progressive and are willing to share the number of employees retrenched due to non-performance, shows a survey.

Leading the category is the pharmaceuticals and healthcare sector, according to Mercer’s 2013 Total Remuneration Survey — All Industries. Mercer is a wholly-owned subsidiary of Marsh & McLennan Companies, a global team of professional services companies, offering clients advice and solutions in the areas of risk, strategy and human capital.

For the first half of 2012-13, voluntary turnover was at 10.1 per cent across industries, said Muninder Anand, Director Information Production Solutions, Mercer.

Leading the pack

Though voluntary turnover in auto sector (at 9.3 per cent) was highest across sectors, the staff retrenchment was almost negligible. However, in pharmaceutical and healthcare sector the voluntary turnover was nine per cent during the first half of 2012-13 and almost 4.4 per cent were those who were retrenched by the companies for non-performance.

These are mainly front-line employees, says Anand. Apart from the obvious reasons of pressure on cost, the companies hiring more, the pharmaceutical and healthcare sector has a more human face, says Anand, adding that this makes it all the more important for them to have performers.

For 2011-12, the highest turnover was seen in hi-tech industry followed by the pharmaceuticals and consumer goods industry, while for 2012-13 (first half) the turnover was high across all industries. But, the highest percentage of staff retrenchment in both the years was in pharmaceutical and healthcare sector.

Mercer’s survey was based on responses of 734 organisations across seven industries — pharmaceutical and medical equipment, auto and automobiles, chemical, consumer goods, manufacturing, hi-tech (telecom, IT) and oil and gas.

The Survey involves all career levels, covering all facets of rewards and benefits within an organisation. This survey is conducted twice a year.

According to it, 72 per cent of companies are expecting to increase their headcount and salary by 12 per cent across industries and career levels in 2013-14.

The salary increase forecast for 2013-14 is the same as actual salary rise of 12 per cent for 2012-13. Among different industries surveyed, the projected salary jump for the pharmaceutical sector is the highest at 12.5 per cent and lowest for the hi-tech sector at 11.5 per cent. The decline in IT sector was mainly because of drop in overall sentiments for the sector, Anand said.

Filling the gap

Actual salary increase across industries and career levels in 2012-13 was at 12 per cent. With intentions to hire in 2013-14, coupled with increased competition for talent, salary increase levels will be similar to 2012 levels, it revealed.

The findings also revealed that 72 per cent of the respondents indicate recruiting for new positions and attrition backfill over the next twelve months, though there is a 12 per cent decline from hiring intentions in 2012-13.

Anand said, “Corporate sentiment is cautiously positive, though companies are adopting a wait-and-see policy. Our research suggests that companies are not looking at holding back increments in 2012-13, but are likely to be more selective. Performance-based pay and rewards will gain prominence in the appraisal cycle. Hiring will still continue to be on the agenda for most companies in 2013-14.”

While companies continue to budget for double-digit increments, there appears to be a strong sentiment to contain costs, leading to companies re-evaluating their budgets, Anand said.

Projected remuneration for heads of organisation in the pharmaceutical sector in 2013-14 is the highest at 13 per cent, compared to other industries.

Variable pay-out

There is an increase in variable bonus pay across industries from actual payout of 19.2 per cent in 2011-12 to a projection of 19.3 per cent in 2012-13. Actual variable bonus percentage (of annual guaranteed cash salary) was highest for the hi-tech sector in 2011-12 at 25.5 per cent, followed by the oil and gas sector at 20.6 per cent and consumer at 20.3 per cent.

Hi-tech and pharmaceutical sectors continue to lead projected variable payouts in 2012-13 at 25.7 per cent and 23.5 per cent, respectively, it said.

In fact, actual average variable bonus for heads of organisations in the consumer goods sector was highest at 34.7 per cent in 2011-12, while pharmaceutical sector leads projected variable bonus for heads of organisations in 2012-13 at 32 per cent.

“In the current business environment, cost optimisation is inevitable leading to organisations operating within tight budgets and effectively motivating workforce or high performers. In view of this, companies are increasingly moving employee compensation away from a fixed-pay approach to one that relies more on variable compensation. Many employers are considering a “total rewards” approach to compensating employees.” Anand added.

The target sales incentive payout planned for 2012-13 (24.8 per cent) is more than the actual given out in 2011-12 (22.9 per cent) across industries. The oil & gas sector has substantially increased their target sales incentive for 2012-13 to 37.4 per cent compared to the actual 18.2 per given out in 2011-12.


(This article was published on March 7, 2013)
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