Employee Retention : A Challenge

A Project in Human Resources Management

Semester V
T. Y. B. M. S.
Sydenham College of Commerce and Economics

Acknowledgements
We would like to acknowledge our Prof. Sudhir Jadhav for firstly
having given us a very relevant topic for the project. This topic is
not only relevant in consideration of the examinations, but most
importantly also, in the current market situation. The research that
was done for the information for this topic has quite lucidly proven
its increasing importance and role in the effectiveness of the Human
Resources Department.

We would like to make a mention of Mr. Colin Brown, from whose

website we have obtained a lot of information. This information was
very coherently presented. Also, the language used made most of
the documents easy to comprehend.

We would also like to acknowledge that most of our source of

information for this project has been thanks to the widespread reach
of the internet and this has enabled us to understand concepts,
examples and practices in various companies.

Index

1. Introduction

2. Reasons for its Increasing Relevance

2
 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

Companies

8. Bibliography

Introduction
“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

organization?”
• “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.”

3
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 of?
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

4
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 concept.

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 turnover.

• 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

5
 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 employment.

• 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 managers.”

• 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.

6
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

7
opportunity to select someone who is unlikely to be disappointed,
and therefore, more likely to stay.

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.

8
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

9
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 firm.
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 deadlines.

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

10
 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

11
 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 place.

• 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 well.
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
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

Instead,
• 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 goals
• Detail available resources, schedule any training, arrange a mentor if
appropriate
• 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.

2
• 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.

3
• 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
• Work life balance guide
• Performance agreement
• Development plan
• Dialogue
5) Retention Focused Career Support:
• Provide the resources they
need to the job
• Delegation, autonomy and
initiative
• Encourage ideas
• Provide challenging work

The new psychological contract between employee and employer

appears to be largely focused around career development.

• Coaching and mentoring

4
• 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 term.

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 replacement.

5
Try to move towards focusing on productivity and results rather than
hours worked.

• 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.

6
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.

7
 • 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 following:

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

8
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 etc

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,

9
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.

10
 Compensation & Benefits in the IT and
ITES Sector

Compensation:

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

11
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.

Benefits:

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.

12
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.
Bibliography

Textbook:

Human Resources Management - Ashwathappa

Websites:

- www.orcworldwide.com
- www.entrepreneur.com/encyclopedia/term/82184.html
- www.employeeretentionstrategies.com
- www.bpoindia.org/research/retention-strategies-call-center-
industry.shtml
- www.employee-retention-guide.com

13