Employee Retention - Project-2

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Employee Retention - Project-2 Powered By Docstoc

1.   Introduction

2.   Reasons for its Increasing Relevance

3.   A Challenge

     1) 10 Reasons why Employees Leave

4.   Employee Retention Strategies

     1)   Retention Focused Recruitment
     2)   Retention Focused Orientation
     3)   Job Sculpting
     4)   Retention Focused Managing
     5)   Retention Focused Career Support
     6)   Work – Life Balance Measures
     7)   Retention Focused Reward
     8)   Retention Focused Communication

5.   Benefits of Investing in Employee Retention

6.   Benefits offered by the BPO Companies

7.   Compensation and Benefits provided by IT, ITES

8.   Bibliography

“Employee retention.” Ask 10 managers what they mean by the term and
you’ll receive 10 (sometimes very) different answers.

Answers like these:

• “Employee retention? You mean stopping people from leaving this
• “Employee retention is all about keeping good people.”
• “Getting our compensation and benefits into line with the marketplace.”
• “Stock options, crèche facilities, and other perks.”
• “It’s got to do with our culture and how we treat people.”
• “Staunching the high employee turnover we have in department x or job
function y.”

Now what u all will be wondering is which one of these is the right definition
or is it a combination of these or is it something that we have not yet spoken
Well it is a combination of all of this and something that we have not yet
spoken of.

You may be thinking to yourself, “Oh great, employee retention. Yet another
supervisory challenge.” Employee retention is one of the hottest management
topics in the United States for good reason; it is impacting employers on a
daily basis. The number of qualified applicants available for vacant positions
is currently in decline and employers are finding it difficult to hire new
employees and to keep employees over the long run.

Let Us see what “Employee Retention” used to mean

This entails understanding just a little history. The term “employee retention”
first began to appear with regularity on the business scene in the 1970s and
early ’80s. Until then, during the early and mid-1900s, the essence of the
relationship between employer and employee had been (by and large) a
statement of the status quo: You come work for me, do a good job, and, so

long as economic conditions allow, I will continue to employ you. It was not
unusual for people who entered the job market as late as the 1950s and ’60s to
remain with one employer for a very long time—sometimes for the duration
of their working life. If they changed jobs, it was usually a major career and
life decision, and someone who made many and frequent job changes was
seen as somewhat out of the ordinary. As a natural result of this “status quo”
employer-employee relationship, an employee leaving his or her job
voluntarily was seen as an aberration, something that shouldn’t really have
happened. After all, the essence of “status quo” is just that little or nothing
should change in the relationship—and leaving was a pretty big change!

What is Employee Retention Today?

According to The HR Priorities Survey from ORC Worldwide an HR
consulting and data services firm, nearly 62 percent of respondents to their
survey opined that talent management will be the most pressing strategic
issue they face in year. The findings of the survey also indicated that 33
percent of talent management programs include workforce acquisition,
assessment, development, and retention as areas that will consume most of
the survey respondents' time this year 2007 (see Anonymous, 2007). Retention
has emerged as the focus of much time and attention in recent years,
particularly as part of talent management programs, and so much is known
about it that the HR practitioner who tries to integrate it into a talent program
may grow bewildered by the huge volume of research about it

Employee retention is more than just keeping employees on the job. It is also about sustaining
employees, primarily by enhancing their job satisfaction. Job satisfaction, in turn, can increase
productivity and keep employees energized and motivated to give their best.
Job satisfaction can equate to employees who stick with their current
employer and strive to perform at or above expectations and
standards.Employee retention is commonly considered to mean the ability to
maintain a stable workforce. It is often linked to morale and to organizational
productivity. Retention is thus the opposite of turnover , a well-known

In addition the perception of having a job for life in a public sector role no
longer exists. The trend for the younger generation of workers is to shift from
job to job and this is becoming a norm of society. Companies that can recruit the
best talent and retain them will have an edge in the long run.

“Today talented persons are like frogs in a wheelbarrow, which can jump at
any point of time when they sense opportunities”

           Reasons for its Increasing Relevance
   Average employee turnover is 14.4% annually, according to the Bureau of
    National Affairs. And, turnover rates are on the rise, the Bureau now
    reports; turnover also varies widely among different industries.

   The blow to morale and increased job stress when remaining employees
    are burdened with the distribution of the departed employee’s workload,
    the negative impact on customer service is a direct result of their high

   Replacement costs for a departing employee are estimated at one-third of
    his or her salary. Even at the former minimum wage, the cost to replace an
    employee is $3,700. The US Department of Labor’s Bureau of Labor
    Statistics estimates average costs to replace a worker in private industry at
    $13,996. (To determine an organization’s annual turnover costs, simply
    multiply turnover cost by the number of annual new hires.*) This also
    leads to future turnover of employees who are lured to other
    organizations by their friends who have departed.

   Estimates have determined that lost knowledge that leaves with the
    departing employee can be as high as 50% of the exiting employee’s salary
    for one year of service; and, this figure grows by 10% for each year of

   On average, 30% of a financial advisor’s clients will move with their
    advisor if he or she changes firms.

   The total cost of turnover is estimated to be somewhere between 30
    percent of the annual salary of hourly employees (Cornell University) and
    150 percent as estimated by the Saratoga Institute (Price Waterhouse
    Coopers). Taking a fairly conservative estimate that the financial loss from
    one employee is equal to his or her annual salary, the negative financial
    impact of turnover to the bottom line can be substantial.

   In-depth interviews by the Gallup Organization of over 80,000 managers
    in over 400 organizations and offers the following finding: “<It tells us
    that people leave managers, not companies. So much money has been
    thrown at the challenge of keeping good people—in the form of better
    pay, better perks, and better training— when, in the end, turnover is
    mostly a manager issue. If you have a turnover problem, look first to your

   Most of the HR functions of IT organizations spend more than 50 % their
    time and energy in hiring new resources without investing much time in
    the way their human resources can be retained. Fact is, it takes 25 to 30 %
    more for organization to retain the existing qualified resource as compare
    to spending more than 50 % in getting new resource as a replacement of
    an existing resource.

And the recent turnover figures about U.S. are

Overall U.S. voluntary turnover increased slightly to 23.4% annually, up from
22.7% the previous year. The highest turnover by far is still in the
Accommodation and Food Services sector at 56.4% and the Leisure and
Hospitality sector at 52.2%. Sectors that saw the highest increase in turnover
were Accommodation and Food Services, up 7% from the previous year,
Leisure and Hospitality, up 5.4% and Information, up 4.5%. The only sectors
seeing a (slight) decrease in turnover were Real Estate, Natural Resources and
Mining,        and        Professional      and        Business       Services.

In the Government sector, turnover was up slightly at 8.2% with the Federal
sector increasing the most to 9.3% up from 5.7%. Regionally, all areas were up
slightly except the Northeast which saw a slight decrease.

                             A Challenge

                 10 Reasons Why Employees Leave

1. Expectations not met:

Expectations play a large part in determining whether an employee is
satisfied or dissatisfied with the current state of affairs.

On joining the firm the individual will have a range of expectations covering
areas such as the style of management, the working hours, holidays, pay,
bonus and so on.

It is not unusual for employees to leave within the first six months when they
discover that things aren’t quite as they imagined they would be.

Their expectations may have been unrealistic from day one, but each
departure is yet more disruption, harming productivity, adding extra
unnecessary costs and making it more difficult to reach goals for sales,
revenue and profitability.

Few firms seem to appreciate the importance of expectations. They don’t ask
candidates about their expectations, giving them the opportunity to select
someone who is unlikely to be disappointed, and therefore, more likely to

2. Mismatch between the person and the role

Employees who find themselves in roles that do not suit their individual
strengths, tend not to stay around that long.

A productive employee gets promoted into a position that requires skills that
they do not possess. A role that exposes their weaknesses, and as a result, a
role that they do not enjoy.

Faced with the prospect of having to spend many months, perhaps years, in a
job that is a struggle, a job that they find difficult, a job that is a mismatch for
their specific talents, most of them choose to leave the company and go.

3. Mismatch between person and the culture of the firm

It is not so much that there is a single ideal culture, more that cultures vary,
and as many departures show, not everyone is likely to be ideally suited to
culture of your firm.

Some workplaces are high pressured, fast paced, dynamic. Ideal for people
who thrive on adrenaline, who enjoy this tempo, constantly being on the go.
Others are caring, emotional, long discussions, shared views. Endless
dialogue before action is taken. Everyone’s opinion counts.

Put an employee in a culture that suits their temperament and they feel at
home. It is an environment in which they can function to the best of their
abilities. But put an employee in a firm whose culture does not suit their
personality, their style or their approach and it rarely works. They don’t
settle, they under-perform, they miss the feel of previous employers where
they were able to contribute more. They leave.

4. Insufficient opportunities for growth and advancement

Employees want to make progress, to get ahead. They want to make that next
step up the career ladder. They think about where they would like to be in 5
years time, in 10 years time.

Their loyalty is largely to themselves, to make the most out of the natural
talents, the skills, and determination they possess.

They recognize the importance of building new skills, refining current ones,
getting new experiences. If the opportunities aren’t available with their
current employer, they will find look elsewhere.

5. Insufficient recognition or appreciation

The Employees that don’t receive adequate recognition for their contribution,
that get little appreciation for their efforts, start to wonder why they bother.
And it doesn’t take much to tempt them away.

Employees that did not feel valued, that felt that their efforts, their hard work,
was not appreciated. That their achievements, their contribution to the
success of the business, was not recognised.

Employees want to feel valued; as though their role is important, as though
the business needs them. They want someone to say thank you. Thanks for
that piece of work, thanks for helping out in a crisis, thanks for dealing with
that problem.

6. Problems with direct manager

The state of the relationship between an employee and their direct manager
goes a long way towards determining whether they stay or leave.

Some employees stay far longer than might otherwise be expected because of
the relationship they have with their supervisor. Others leave jobs in the first
few months because they sense their manager is not someone that brings the
best out of them.

And they need to get away. Because the daily challenge of dealing with
someone they dislike, someone that lacks basic people skills, is just too much
to bear.
Poor relationships between employees and their managers are one of the most
common reasons for employee turnover.

7. Dissatisfaction with pay

Not receiving a fair salary, a fair pay rise, a fair bonus. Dissatisfaction with
financial rewards is complex.

Much of the dissatisfaction is due to comparisons. A previously adequate
salary starts to feel insufficient when you have just learnt that a new arrival is
receiving a higher wage for performing a similar role.

Salaries rarely remain a secret. The information leaks out. If it isn’t fair, if it
isn’t equitable, if the procedure for determining pay settlements is tainted,
employees become dissatisfied. And in time many of them leave.

8. Stress

The stress of work, the stress from working long hours, the stress related to
pressure from above; employees can take only so much.

Stress drives employees into the arms of alternative employers. They simply
want to get away from the workplace, from the people involved, from the
A stressful workplace is rarely a productive one. Attrition is high, people
don’t matter; there will always be someone else to fill the vacancy. And in
time they too will probably leave for much the same reasons.

Stressful work environments tend to be high turnover environments. If there
is an alternative, people take it.

9. Lack of work life balance

Employees have responsibilities to their employer, to their families, to their
friends. There are times when the demands of work require extra hours,
staying late to get things finished, working during weekends to meet

For some employees the demands of work are no longer compatible with the
needs of their family, the needs that exist beyond the workplace. Perhaps they
coped better when they were younger, before they got married, before they
had a family. But now the arrangement just isn’t practical.

They need a better balance. They need to have time for themselves. Time to
take care of loved ones. Free time not devoted to work.

10. Loss of confidence in the firm, particularly leadership.

Confidence matters. Companies go bust; you just need to read the papers,
watch the news, to realize the risk involved.

When employees lose confidence in the firm’s leadership they head towards
the exit door.

They know that confidence matters, that seemingly invincible companies can
collapse in days, if not hours. They don’t want to be left without a job, should
the company go under, or be taken over.

Other factors for Retention being a challenge are:
      A robust economy
      Shift in how people view their careers
      Changes in the unspoken "contract" between employer and employee
      Corporate cocooning
      A new generation of workers

   Changes in social mores

               Employee Retention Strategies

1) Retention Focused Recruitment:

Recruitment and retention are interlinked. Some departures are almost
inevitable from day one. Make sure you select the right person in the first

• Realistic job preview - To avoid new recruits leaving during the first few
weeks when they discover the job is somewhat different to what they had
expected, provide a realistic job preview.

• Sharing expectations at interview – Expectations regarding the pay policy,
willingness to work long hours, ability to work effectively in teams, need to
conform to the firm's culture, willingness to travel and the candidate’s
expectations regarding career advancement, expected rate of rise in salary,
preferred management style

• Person - culture fit - It is important that employees share similar values and
are able to function within the cultural environment of the firm. A fair
proportion of early departures are employees that were never likely to be able
to perform to an appropriate level within the firm, due to having values that
are incongruent with those of the firm.

• Person/skills - job fit - Think carefully about the skills needed to do the job
Study your best performers.
Determine their competencies.
Select for competencies:
           - Talents
           - Knowledge
           - Self-management traits
           - Motivations

• Referrals - new recruits that were referred by current employees tend to
stay longer. They have the advantage of inside information and so are less
likely to find the job or role contains unpleasant surprises. Current employees
are unlikely to want to jeopardise their own standing by referring friends who
are just not appropriate for the work involved.
• Including team members in the recruitment process - For roles that a largely
team based, or managerial, it is worth taking into consideration the opinions
of those who will have daily contact with the post holder. It is a fact of life
that many hiring failures come down to clashes of personality. When
interviewing prospective managers, consider the notion of upward feedback.

• Promote rather than hire - Internal promotions send a signal to employees
that they too may get the chance of career advancement, if they remain with
the firm. Conversely, if strong internal candidates are not selected, it may look
like the best option is to leave, if you want to get ahead.
    - save money on recruitment
    - save money on signing bonuses
    - signal to employees
    - person - culture fit known

2) Retention Focused Orientation:

Effective orientation plays a vital role in the longer term retention of employees,
yet many orientation programs are little more than induction. The purpose of
orientation is to get the new recruit settled into position as quickly as possible.

• First impressions count.
• The time window is very small.

Common mistakes

• Not having the new employee's equipment in place
• Ignoring them or leaving them to read manuals
• Long lectures, too much information, endless form filling
• Not involving the new recruit's manager and department
• Monologue rather than dialogue

• Make sure equipment is in position
• Show them how they can achieve
• Explain what is expected of them
• Explain how to add value
• Explain how to be a team player
• Help them to feel at home
• Buddies

On their first day:

• Introduce the new employee to team members
• Give them a brief tour of the workplace, showing them where things are kept
• Explain the importance of their role in the success of the business
• Introduce them to their buddy
• Brief them on the company's business strategy, objectives, values etc
• Ask the employee to promise that they will come and talk to you before
deciding to leave the company
During the first week:

• Ask them how they like to be managed, motivated
• Give appropriate assignments
• Get them started so they can make a real contribution
• Establish medium term goals including both personal and career development
• Detail available resources, schedule any training, arrange a mentor if
• Arrange short meetings to check how they are doing
• Get colleagues to meet them to explain how best to communicate
• Invite them to the next social event

3) Job Sculpting:

Many departures arise from frustrations due to the day to day experience of the role, rather
than the issues relating to the firm or to individuals.

• Move them internally first - If someone is unhappy in their role, see if you can
find them a new position internally, before they opt to leave.

• Match talents to the requirements of the role - Match talents to the
requirements of the role. Get employees to use their natural strengths, their
intrinsic talents. If you want people to stay, get them to use their natural talents.
Most people enjoy doing what they are good at. They like being able to excel.

• Increase job variety - Sometimes the lack of variety involved in their role can
frustrate employees to the extent that they decide to leave. Some people like
routine, others like change. Again, a little imagination, a small adjustment, can be
the difference between losing them and retaining them.

• Tailor roles to suit individuals - If you have individuals you wish to retain, it
makes sense to tailor roles to suit them. This way they get far more value from
work and it is more difficult for other firms to attract them away. Customizing
roles to suit individuals can be a winning retention strategy for some firms.

• Enriching jobs - Enriched jobs have long been shown to offer extra value to
many employees
The keys to job enrichment: Skill variety, Task completion, Task significance,
Autonomy and Feedback

• Intrinsic motivation - Understand why people want to work in the first place

• Passions - Individuals that get to focus on their passions are far more difficult
to tempt away. Connecting to passions is a great way can be a great way to
improve retention. Most alternatives will start to look far less attractive once an
employee gets the chance to focus on something they are passionate about.

• Meaningful work - Some employees find it difficult to connect their day to day
work with the end product. In a sense their work appears to lack meaning. By
explaining how their job fits into the big picture, you can create meaning, thus
increasing their motivation, and perhaps their willingness to stay.

4) Retention focused managing:

People join companies, but leave managers. It’s one of those common sayings
that are mentioned in almost every book on retention.

• Select managers with good people skills - The selection of managers is crucial.
Don’t promote individuals into people management roles when their strengths
lie elsewhere.

• Use incentives, recognition and support to encourage retention - Use
incentives, recognition and additional support to encourage managers to adopt
behaviour that reduces the push factor

• Ask managers to help you - Asking managers to help you. Sometimes the
smart tactic is to explain the problem and ask managers to help.

• Do reassign poor people managers so they can use their strengths - Do
reassign poor people managers into areas where they can use their strengths. It is
far easier to build on natural strengths than to fix weaknesses.

• Pay careful attention to the way you assess and reward managers - If you
assess managers on the numbers, that is what they are likely to focus on. If their
pay is determined solely by results, don’t expect them to pay much attention to
retaining employees.
Think about ways in which their assessment, and perhaps even reward, can be
designed to encourage behaviour that will assist retention. Focus on creating
value for employees.

• Consider upwards feedback - To encourage managers to pay attention to
employee development, get employees to provide upwards feedback.

• Explain why their work is                 • Goal setting
significant                                 • Provide the resources they need to
• Work life balance guide                   the job
• Performance agreement                     • Delegation, autonomy and
• Development plan                          initiative
• Dialogue                                  • Encourage ideas
                                            • Provide challenging work

5) Retention Focused Career Support:

The new psychological contract between employee and employer appears to be
largely focused around career development.

• Coaching and mentoring

• Career development interviews - Annual career development interviews are a
sensible retention measure. Examine a wide range of options from new work
assignments, job enrichment, special projects, additional responsibilities, job
sculpting, training, to internal and external moves. Make sure the focus is on
what is best for the employee.

• Development plans

• Qualifications: professional and educational

• Upwards feedback on manager as employee developer

• Internal job banks - Create new options so that employees can move internally,
rather than having to leave the firm, not necessarily at the managerial level.

• Alternative career paths

• Filling unmet needs

Build a culture that promotes learning.

Not something that can be achieved overnight, but a few low cost strategies that
encourage learning can have an impact in situations where employees are
unhappy about the amount of career support they are getting.

If opportunities for genuine career advancement are limited, the best you can
hope for is to extend the length of time an employee stays. Though this sounds a
strange way to improve retention, it can work as employees are willing to stay
while they are developing new skills that will benefit their career in the longer
6) Work – Life Balance Measures:

Offering a range of flexible working options can have a dramatic impact on
employee turnover in certain circumstances.

Giving employees more control over the hours they work can be the difference
between retaining them and having to spend a fortune trying to find a

Try to move towards focusing on productivity and results rather than hours

• Part time work
• Flexi-time
• Job sharing
• Compressed workweek
• Working from home

7) Retention Focused Reward:

Profit sharing, or gain sharing, appears to be the most effective reward strategy
from a retention perspective.

Of all the various reward strategies to have been implemented over recent years,
profit sharing appears to be the most effective from a retention perspective.

8) Communication:

Recent years have seen firms place emphasis on communicating their message to
employees. Communication in the opposite direction is rarely as effective.

It is possible to improve lines of communication should employee insight reveal
this to be an issue that needs to be addressed.

Some firms use schemes that encourage employees to contribute their ideas on
potential improvements. Others appoint people in roles specifically designed to
listen in to employee opinion.

Annual employee attitude surveys are a common occurrence in many sectors.
While a few firms choose to conduct pulse surveys to measure the temperature
on certain key issues.

Conducting retention focused interviews every six months is a sensible way to
keep track of the current state of play.

    Benefits of Investing in Employee Retention

    Money invested in the “100 Best Companies to Work for”® would have
returned almost three times more than the same amount of a portfolio in the
S&P 500 during the past six years

    The Number 1 “Best Company” for 2007 is Google, where turnover is
2.6% -- a record low. Keep in mind that Google has a fast-paced, stressful and
demanding work culture!

     The 2006/2007 Work USA® survey of more than 12,000 US workers across
all job levels and in all major business sectors shows that financial performance
of organizations is strongly related to employee engagement.

    This same study found that, for the typical S&P 500 organization, a
significant improvement in employee engagement is associated with a $95
million increase in revenue.

    Additionally, the Watson Wyatt Human Capital Index® study of 147
employers found that firms that fill vacancies quickly (within a month) have
financially outperformed those that take longer by 48 percentage points over a
three-year period.

    A study by Cornell University professor Christopher Collins found that
small businesses that implement employee-management strategies experience
22.1% higher revenue growth, 23.3% higher profit growth and a 66.8%
reduction in turnover over companies that do not use similar practices.

              Benefits Offered by BPO Companies

The average attrition rate in this sector is still 35-40%.

Employee Benefits Provided By Majority of the BPO Companies

A part from the legal and mandatory benefits such as provident-fund and
gratuity, below is a list of other benefits<BPO professionals are entitled to the

 1. Group Medi-claim Insurance Scheme: This insurance scheme is to provide
adequate insurance coverage of employees for expenses related to hospitalization
due to illness, disease or injury or pregnancy in case of female employees or
spouse of male employees. All employees and their dependent family members
are eligible. Dependent family members include spouse, non-earning parents
and children above three months

2. Personal Accident Insurance Scheme: This scheme is to provide adequate
insurance coverage for Hospitalization expenses arising out of injuries sustained
in an accident. This covers total / partial disablement / death due to accident and
due to accidents.

3. Subsidized Food and Transportation: The organizations provide
transportation facility to all the employees from home till office at subsidized
rates. The lunch provided is also subsidized.

4. Company Leased Accommodation: Some of the companies provides shared
accommodation for all the out station employees, in fact some of the BPO
companies also undertakes to pay electricity/water bills as well as the Society
charges for the shared accommodation. The purpose is to provide to the
employees to lead a more comfortable work life balance.

5. Recreation, Cafeteria, ATM and Concierge facilities: The recreation facilities
include pool tables, chess tables and coffee bars. Companies also have well
equipped gyms, personal trainers and showers at facilities.

6. Corporate Credit Card: The main purpose of the corporate credit card is
enable the timely and efficient payment of official expenses which the employees

undertake for purposes such as travel related expenses like Hotel bills, Air tickets

7. Cellular Phone / Laptop: Cellular phone and / or Laptop are provided to the
employees on the basis of business need. The employee is responsible for the
maintenance and safeguarding of the asset.

8. Personal Health Care (Regular medical check-ups): Some of the BPO'S
provides the facility for extensive health check-up. For employees with above 40
years of age, the medical check-up can be done once a year.

9. Loans: Many BPO companies provide loan facility on three different occasions:
Employees are provided with financial assistance in case of a medical
emergency. Employees are also provided with financial assistance at the time of
their wedding. And, the new recruits are provided with interest free loans to
assist them in their initial settlement at the work location.

10. Educational Benefits: Many BPO companies have this policy to develop the
personality and knowledge level of their employees and hence reimburses the
expenses incurred towards tuition fees, examination fees, and purchase of books
subject, for pursuing MBA, and/or other management qualification at India's top
most Business Schools.

11. Performance based incentives: In many BPO companies they have plans for,
performance based incentive scheme. The parameters for calculation are process
performance i.e. speed, accuracy and productivity of each process. The Pay for
Performance can be as much as 22% of the salary.

12. Flexi-time: The main objective of the flextime policy is to provide opportunity
to employees to work with flexible work schedules and set out conditions for
availing this provision. Flexible work schedules are initiated by employees and
approved by management to meet business commitments while supporting
employee personal life needs .The factors on which Flexi time is allowed to an
employee include: Child or Parent care, Health situation, Maternity, Formal
education program

13. Flexible Salary Benefits: Its main objective is to provide flexibility to the
employees to plan a tax-effective compensation structure by balancing the
monthly net income, yearly benefits and income tax payable. It is applicable of
all the employees of the organization. The Salary consists of Basic, DA and
Conveyance Allowance. The Flexible Benefit Plan consists of: House Rent
Allowance, Leave Travel Assistance, Medical Reimbursement, Special Allowance

14. Regular Get together and other cultural programs: The companies organizes
cultural program as and when possible but most of the times, once in a quarter,
in which all the employees are given an opportunity to display their talents in
dramatics, singing, acting, dancing etc. Apart from that the organizations also
conduct various sports programs such as Cricket, football, etc and regularly play
matches with the teams of other organizations and colleges.

15. Employee Referral Scheme: In several companies employee referral scheme
is implemented to encourage employees to refer friends and relatives for
employment in the organization.

Compensation & Benefits in the IT and ITES Sector


1. 91 per cent of IT and 97 per cent of ITES companies have a stated philosophy
of benchmarking compensation against the market; 48 per cent companies
position their compensation above the market median.

2. IT and ITES industry companies have a very high cash orientation compared
to other traditional industries, with a Cash to Benefits ratio of 75:25.

3. Bangalore is the most expensive in terms of compensation for IT - 17 per cent
higher than the national average.

4. An 18 percentage point increase was reported in variable pay plans in the
industry, when compared with last year.

5. Performance-based increases in the IT industry rose by 23 percentage points
when compared with last year.

6. A jump in the average salary increases from 12.2 per cent in 2002 to 15.4 per
cent in 2003 in the ITES companies and from 12.9 per cent to 14.5 per cent in the
IT companies for the Professional/Supervisor/Technical Level (i.e. Junior
Management). The ITES and IT companies are currently in a high-growth phase,
and this supports the high salary increases.

7. Cash based components (base salary, cash emoluments and variable pay) have
gone up from last year, whereas Benefits (loans, conveyance and housing) have
gone down. More and more companies are now using a higher proportion of
their total employee budget towards variable pay to drive business results.


Organizations in both the IT and ITES industry are consolidating benefits, with a
greater focus on employee attraction and retention.

Company Cars: An 18-20 percentage point reduction was reported in company
car programs in the IT and ITES industry, as more companies moved towards
cash-based programs.

Loan Programmes: A 5 to 15 percentage point decrease was reported in the
various loan schemes (housing, vehicle, and other loans) from last year.

Stock Options: Stock options are losing their charm in the IT and ITES industry.
A 10 percentage point drop was reported in the prevalence of stock option
programs between 2002 and 2003.

Non-Statutory Retirement Benefits: There was a 5 to 10 percentage point
decrease in the number of companies offering non-statutory retirement benefits,
such as superannuation programs.

People Practices:

Recruitment: A 7 - 14 percentage point reduction was reported in the allocated
budget for recruitment, hiring, and orientation from 2002 to 2003.

Training: Training hours in the IT industry decreased by 13 per cent, whereas
the ITES industry reported a 4.3 per cent increase in training hours over last year.

Career Paths: ITES organizations are focusing on more long-term orientation for
employees. A 14 percentage point increase was reported in the number of
organizations offering employees a formalized career path.

Workforce: 41 per cent of the IT companies saw a significant workforce
reduction (affecting 5 per cent or more employees). This figure for the ITES
industry stood at 11.5 per cent.

Rewards and Recognition: There has been a 4 percentage point increase in the
number of organizations offering special recognition awards to their employees,
with 95 per cent of the ITES companies having these awards in place.



Human Resources Management - Ashwathappa




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