Companies sit on bonus payout to delay attrition

While delays in bonus announcements give firms some time, it is also leading to delays in the hiring cycle.. istock
While delays in bonus announcements give firms some time, it is also leading to delays in the hiring cycle.. istock

Summary

  • By delaying the payment of bonuses, companies are biding their time to find replacements

MUMBAI : Information technology companies, fintechs, consulting firms, and startups are delaying performance bonus payouts to buy more time in view of the hiring frenzy at India Inc, said industry executives.

“Delay in bonuses is a direct impact of the ‘Great Resignation’. The delays are giving a company more time to find replacements. However, to negate that, recruiting companies are coming up with multiple retention offers, joining bonuses, and stock options to get a candidate," said Kamal Karanth, co-founder of recruitment firm Xpheno.

If bonus announcements are delayed by a few months and candidates are required to serve a notice period, companies get a leeway of five-six months. However, this is also leading to delays in the hiring cycle, said recruiters.

The term, great resignation, refers to the hiring frenzy witnessed across sectors such as IT, startups and retail, since September-October 2021. The pent-up demand following the third covid wave led to a flurry of offers from employers, including joining bonuses, high increments and stock options to lure candidates, which led to high attrition levels and forced companies to take measures to retain employees.

Considering that recruiters were expecting top performers across sectors to get 100% of the bonus amount this year, resigning at this time will lead to forfeiting a significant amount.

Performance bonuses are typically announced months ahead in the tech sector, said OptimHire founder and chief executive Lakshmi M. Kodali. “Some top candidates had been told about the bonus they would get in December and these are tools used to retain them. The recruiter and client will have to negotiate and come up with a joining bonus and better Esop packages." Kodali also expects the hiring frenzy to continue for a while.

About 90% of chief executives expect hirings to remain at the same levels or exceed 2021 figures this year, with digital talent making up half of all new hires, according to a study by the National Association of Software and Service Companies (Nasscom). In another study, Nasscom had said 450,000 employees were added so far in this financial year.

With India Inc. trying to keep pace with accelerated digital adoption and cloud-based services, the need for talent in Java, Javascript, Python and SQL is robust. However, the pressure is felt in other sectors, too.

“Consulting companies have seen a big drain where stratups have poached a lot of middle to senior management. The companies are now officially letting employees know what their bonus for the year is, but payouts are expected in June-July instead of April," the human resource head of a Mumbai-based consulting firm said, seeking anonymity.

The notice period among the senior management is two to three months, which means the new employer has to factor in buyout amounts and performance bonus to get a candidate.

“This entire negotiation is delaying the hiring process, last-minute drop outs have increased by 40-50%, and there is a lot of uncertainty until the candidate joins," said Srinivas Nanduri, partner India and emerging markets, Maxima Global Executive Search. “Some tech companies had anticipated the rush for jobs and announced bonuses in December, but the rollout of bonus will happen in March-April. This was done to prevent the employee from leaving when the hiring spree started."

However, employers are ready to loosen purse strings to get the right talent. “There will be delays but the majority of companies have no option but to meet their hiring targets despite higher cost per candidate," said Shiv Agrawal , managing director, ABC Consultants.

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