India - B School offers tilting towards variable pay

MUMBAI: With companies taking recourse to cost-cutting in a bid to weather downward pressures, variable pay is seen assuming gigantic proportions in the cost-to-company (CTC) packages handed out in pre-placement offers at business schools this season. The case of a student at New Delhi’s Indian Institute of Foreign Trade earlier this year is worth repeating here. In March this year, the student received an offer of Rs 25 lakh per annum. A mammoth package for a fresher, one would say, but for the fact that only Rs 5 lakh of it was guaranteed annually, as fixed pay. The rest, a whopping Rs 20 lakh, would depend on the student’s performance in that company, and the performance of that company itself. At the Indian Institute of Management - Calcutta (IIM-C), the variable component in offers made in March ranged from 25% to 100% of the fixed component. Prof P Agnihotri, chairman of career development and placement at IIM-C, is hoping for the best for his wards this time around, but expects packages to get “more and more skewed towards the variable side” all the same.Indeed, indications are things would only get worse this placement season.The bulk of the recruiters at B-schools are investment banks, insurance and financial services companies and IT firms, which have had to bear the brunt of the economic slowdown. Understandably, they wouldn’t be in a mood to splurge.
Judhajit Das, chief - HR, ICICI Prudential Life Insurance pegs the variable pay component at 20-25% of the CTC for this season. That’s a rather optimistic call, say others.The pre-placement offer season generally starts in July, and offers are made on the basis of the projects handled by a student during summer internship. These are followed by final placements early the following year. As usual, both institutes and recruiters are pretty upbeat as the season gets rolling. But, caution remains the buzzword and students should pore through offer letters minutely, say human resource experts. While the total may run into lakhs and crores, one must run the full math to arrive at the figure he will actually take home at the end of a month. Subhro Bhaduri, executive vice-president, human resources, Kotak Mahindra Bank concedes that variable pay could stand undelivered in case the employee fails to perform to expectations or if the company’s margins decline. For unlike the fixed component, the variable component is linked to the performance, of the employee as well as the company. Company bosses have always had us believe that variable pay is a way of inducing a sense of competition among employees. HR experts, though, say it is actually intended at reducing employee costs. Going by Marcel Parkar, chairman of Bangalore-based HR solutions major Ikya Human Capital Solutions, earlier employees looked at variable pay only after completion of a year or so. But now, with the pressure to perform getting intense, variable pay has attained prime importance.