India Inc upbeat on hiring, pay hikes

Corporate India is on the path to recovery after having been pummelled around in the global recessionary storm, with companies showing optimism on hiring and salary increases, says a joint Mercer-CII survey.

The 'India Leading through Unprecedented Times' survey, conducted by Mercer and the Confederation of Indian Industry, said that Indian companies are less likely to consider retrenchment as a means to cut costs as compared to organisations around the globe.

Also, Indian businesses are likely to implement regular pay revisions and inflation corrections before the rest of the world, the survey said.

Indicating that hiring in India is likely to return to normal levels by end-2009, the survey said that this would again spark off a battle for skilled talent.

Indian firms are also cutting costs by reducing employee-travel, the Mercer-CII study said.

India not too badly hit

The survey also said that although Indian firms have not resorted to pay-hikes to woo key employees, they are using innovative incentive instruments to retain talented staff.

The survey's findings summarise the challenges related to talent, compensation, benefits and investment strategy that organisations in India are facing as a result of the current economic conditions.

The objective of the survey is to evaluate current state of human capital practices in India and compare and analyse responses against Mercer's recent global survey results.

While the findings reveal continued actions taken by companies to relieve cost pressures -- workforce reductions, salary freezes, reduced contributions to retirement plans and increased costs for health benefits -- equally notable is the fact that organisations generally are not taking action in response to the economic downturn such as cutting pay and eliminating benefit programs altogether.

The survey shows that the economic downturn has impacted certain countries, like India, less fiercely than others.

Talent management

The study reveals a growing optimism among Indian companies, with 52 per cent of respondents saying they expect financial and business performance to increase in the latter half of 2009.

Most Indian companies who participated are focussing on organic growth, with only 15 per cent actively looking at M&A.

Some 58 per cent of organisations worldwide plan cuts to their workforce in the remainder of 2009 compared to 66 per cent that implemented workforce cuts in the six months prior to the survey.

Significantly, however, only 5 per cent of these organisations plan deep cuts (more than 10 per cent of staff) in the remainder of the year, compared to 13 per cent that made such cuts in the six months preceding the survey

In India, 58 per cent of the respondents are less likely to make drastic workforce reductions. Many are optimistic that they will soon be able to hire at pre-downturn rates, with 31 per cent saying they will be recruiting at originally planned levels for the rest of the year, compared with only 12 per cent of global respondents.

Hiring to continue

While this number bodes well for economic recovery, it also means the return of the war for skilled talent in India.

Despite the impact of the weak economy, many companies remain focussed on their most valuable employees, the survey said.

More than one-third of respondents (31 per cent) said they will continue to hire key talent and workforce overall. Approximately another third of organisations (37 per cent) plan to hire talent to replacement levels only, while 28 per cent expect overall workforce reductions and 2 per cent expect to reduce workforces in 2009.

Mercer's study also shows that organisations are beginning to use or consider alternative work arrangements to control workforce costs. Companies are looking at changing staff mix and sourcing local talent for roles held by expats in some industries. They are also looking at reduced travel and employee mobility.

Compensation

Organisations globally are almost equally divided on whether their 2009 base pay budgets will be more than their 2008 budgets (31 per cent), equal to 2008 budgets (33 per cent) or less than 2008 budgets (36 per cent).

In the past six months, only 18 per cent of Indian participants froze salaries at 2008 pay levels for at least part of their employee population; while 38 per cent froze pay enterprise-wide.

Just 16 per cent deferred 2009 pay increases and even fewer (4 per cent) decreased salaries from 2008 levels. For the remainder of 2009, 41 per cent respondents are planning to make 2009 pay increases as planned.

Regarding annual bonus payments, 39 per cent of organisations globally awarded smaller bonus payouts for 2009 (based on 2008 performance) compared to 2008 awards (based on 2007 performance) and 28 per cent granted higher bonus payments in 2009 compared to 2008.

Employee concerns

According to Mercer's survey, promotions top the list of employees' concerns -- 38 per cent of organisations said employees expressed significant concern about their promotions in 2009. 32 per cent of respondents said employees expressed significant concern about the how the economy is impacting the overall organisation.

Employment and job stability as a concern was highlighted by 37 per cent of respondents.

The survey also revealed that investment in HR programs such as learning and development may have been hit just as hard in India as the rest of the world.

It also showed that Indian companies are increasingly looking at outsourcing non-core activities such as payroll administration.