HR 2020: What’s New In Pay And Rewards?

Major Compensation Challenges in 2021
Being aware of the challenges will engender better preparedness of HR and reward practitioners to be able to devise the strategies and alternative plans to move ahead in FY 2022.

While the passage of one year does not change significantly how companies reward their employees, or how emerging technologies augment the sophistication of tools used to carry out a compensation exercise, the following are some of the trends that may emerge soon, starting with 2020.

People Born In The New Millennium

The youth born in the new millennium will turn 20 as young graduates and many who are employable will enter the workforce. This lot will have their new aspirations, as we have often seen in numerous studies that rewards people value varies with different eras and ages and other demographic profiles.

The Gig Economy Emergence

The prospect of gig economy becoming more plausible will make more people take the plunge to take up short term assignments or bid for work on dynamic talent cloud marketplaces. Such marketplaces that bring buyers (companies putting up jobs) and sellers (talent) will need to quickly adapt their payments and contracting framework to replicate the success of e-commerce. So far, the companies do not have robust frameworks to cater to these types of marketplaces.

NCR As Hardship Location

With increasing air quality menace in Delhi over the last 5 years, the region of Delhi-NCR will start to lose its attractiveness to the white-collar migrant workforce who will have options to work in Bengaluru, Hyderabad, Mumbai, and Chennai. It will shift the supply of talent towards the peninsula and may even drive salaries up in Gurgaon for people who remain there despite the hardship.

Disappearance Of Special Allowance

From Salary Structure – Supreme Court ruling earlier this year being reiterated during the review petition that allowances such as Special Allowance will be pensionable if basic salary is less than INR 15OOO pm will now force the companies to act. Many companies may have already acted, but those waiting and watching will restructure their compensation structure to reduce allowances and increase basic salary.

Impact Of Code Of Wages 2019

Minimum wages will see a spike, as the government has notified the Code of Wages to replace a group of archaic acts like Payment of Bonus Act, Minimum Wages Act, Equal Remuneration Acts, among others. Minimum wages will now be applicable to an unorganized sector too and will be differentiated based only on geography and skill set. It will reduce the number of min wages slabs from 2500 to 300, and the wages will be set based on the expenditure of a worker’s family of 3 towards food, clothing, rent, fuel and electricity, children’s education, medical, recreation, and contingencies.*

This will lead to a rise in the entry-level salaries and will further erode the labor cost arbitrage that Indian Shared Services and Outsourcing player can afford. Hardest hit here will be the IT and IT-enabled companies that employ vast armies of educated graduates at closer to minimum wage salary in transaction processing jobs.

Telecom Sector Pay

For the longest time, since the launch of Reliance Jio, most telcos were bleeding and had to fire many employees to align their cost structure with declining revenues and market shares. Consolidation of Vodafone and Idea only exacerbated the talent oversupply. While all the woes of the sector have not gone away, with recent Supreme Court ruling asking them to pay spectrum dues to govt., there are some green shoots of recovery to be seen. For starters, all the companies have increased their tariffs, which had dropped to the world’s lowest due to cut-throat competition in the last 10 years. This is a welcome change and will see the fortunes of the company improving, rising profitability, and all leading to higher bonuses and pay increases for employees in the sector. It will have a ripple effect as telecom and its ancillaries are very large employers in the country.

Coming Of Age Of Flex

In various discussions with industry experts, I feel there is a growing trend of companies exploring the adoption of flexible benefits programs for their employees. While some form of flexibility in the compensation the structure is quite commonplace, the flexibility in choosing the desired benefits as per the individual lifestyle needs of the employee have been missing. Many employers have been providing limited flexibility of top-up in sum assured, or voluntarily paid addition of parents in the medical insurance programs, or a small bouquet of similar paid benefits – these are provided optionally over and above the mandatory company-paid basic healthcare plans.

I can foresee that in the next couple of years, this industry will mature, and the ecosystem of service providers like brokers, advisors, insurers, TPAs will be better able to collaborate to come up with products that see easy adoption among the workforce.


Please enter your comment!
Please enter your name here