Short-term incentives are still the most prevalent employee incentive model as 97 per cent of the organisations surveyed by Talent Consulting firm Mercer India said they have it in place in the form of variable and sales incentive payouts, while only 34 per cent of the firms offer long-term incentives such as stock options and restricted shares.
As many as 60 percent of the participating organisations have full-time employees participating in a variable pay plan, according to the survey of 3,00, 000 employees across 41 large organisations carried out to understand how firms are designing incentive plans, especially post-pandemic.
According to the survey respondents, the main objective of short-term incentives is to drive pay for performance and promote employee ownership. 90 per cent of the surveyed companies said they decide on their LTI plans when it comes to employee retention and wealth creation.
LTI is more prevalent in IT and internet e-commerce companies and less so in consumer companies or life sciences, according to the Mercer India study. These are mostly in the form of Restricted Stock Units or Employee Stock Option Plans ESOPs New-age organisations and start-ups seem to be following differentiated practices, such as discretionary grants, ESOPs, appraisal-based grants, etc. The study noted that critical talent is ring-fencing critical talent and providing liquidity to employees.
Most of the organisations that offer LTIs do so from the top level to the mid-level, while IT and e-commerce industries offer more coverage of LTIs, with a few providing it across levels.
g. retention, core performance goals achievement, etc. Mansee Singhal, senior principal rewards consulting leader, said Mercer India.
Several recruiting and HR services firms told Business Today that Indian companies are introducing LTI, a type of deferred incentive, into the salary structure of key senior talent across multiple industries to retain them for at least 2 -- 3 years due to high attrition in a buzzing job market.
The incentive is paid over 1 -- 2 -- 3 years to those on the company's payrolls a certain percentage of their salary. Many companies offer a bonus plus LTI, such as stock plans. Some companies just defer part of the cash bonus over a few years to retain people. Long-term incentives are also provided by ESOPs and Employee Stock Purchase Plan ESPPs.
ESOPs are already prevalent in listed companies, but they are limited to the management or leadership team. That's a small number. ESPPs are being introduced across levels. Recruitment firm Randstad India's MD CEO PS Viswanath told Business Today that around 25 - 30 per cent of the MNCs in India have this option.
The experts said that the IPO frenzy among Indian start-ups has fueled this trend. With record levels of PE VC funding flowing into Indian startups and several of them turning into unicorns, the new-age firms have been hiring aggressively to grow their ventures.