NEW DELHI | MUMBAI: The uncertain economic climate has compelled organizations to alter their approach towards campus compensation by reducing the fixed component and becoming aggressive in pay for performance and joining bonus, reveals the latest Aon Hewitt Campus Study.
The objective is two-fold: to foster a performance oriented environment by linking pay with performance, and to reduce the year-on-year burden of pay increases linked to the fixed pay component.
“There is a larger focus on joining bonuses and variable pay as companies are going in for minimal increase in fixed pay components, and substantial increase in one-time payouts such as joining bonus or increasing variable pay to aggressively link performance and pay,” said Anandorup Ghose, Partner, Aon Hewitt.
The variable pay and joining bonus have registered an increase across all tiers of Bschools. The fixed compensation ranges from 74% for IIMs Ahmedabad, Bangalore, Calcutta and Lucknow to highest 79% for tier3 Bschools.
It’s the same in the case of the B.Tech pay mix as well. The fixed compensation at tierI engineering colleges accounts for 77.5% of the total package compared to 79% last year. For tier 3 colleges, it is 83.2% The survey has responses from 300 organizations across seven industries across different tiers of colleges.
The pan-India study saw participation across industries such as technology, ITeS, ecommerce, consumer products, hospitality, services, financial institutions, manufacturing and life sciences. The data for the study was collected between October 2016 and January 2017.
The overall campus compensation packages have witnessed an increase of 6.9% and 8% for MBA and B.Tech, respectively this year Variable pay and joining bonus constitute 20-25% and 16-23% of total compensation for MBA and B.Tech qualifications, respectively.
“Variable pay has been on the upswing. Companies which are increasing salary packages on campus are preferring to keep the fixed component the same as before, and routing the increase to the variable,” explained NP Padhy, professor in charge of placements at IIT Roorkee.
On the joining bonus front, just about 5% of the overall companies would pay it a few years ago, but now it has gone up to around 1015%.
At the top end, joining bonus, including relocation, can go up to Rs 5 lakh, said Padhy.
The trend is more pronounced at business schools. Prakash Singh, chairman, students affairs and placement, IIM Lucknow, said, “The variable component in salary packages has definitely gone up in recent years and now averages 2030% across the board as companies push the pay-for-performance agenda. In sectors such as consulting and IT, variable is higher.”
Also, more and more companies are now offering joining bonuses to make themselves more attractive to talent. Consequently, this is becoming an important component of salary packages, Singh explained.
Last year, eCommerce emerged as the top paying industry for tier1 MBA graduates, offering 1016% higher than the pan-India average, on total cost to company (TCC) and total fixed cost (TFC) respectively.
Consumer products sector followed closely with 7% and 9% above the pan-India numbers on TCC and TFC, respectively, reveals the survey. The consumer products sector has historically been the front runner.
According to the study, companies are willing to pay tier1 campus hires 2.9 times that of tier3, and 1.8 times that of tier2 campus hires while tier2 campus hires enjoy a pay differential of 1.5 times when compared to tier3 campus hires.
“The premium on talent at top campuses continues to be pronounced and the differentiation in compensation between tier1 and tier2 stays,” Ghose said.