Rethinking Retail: The Story So Far
The support headcount constitutes 7% of the
overall headcount and 20% of the overall wage bill.
On an average, support roles are paid relatively
higher than core roles. However, within the support
universe it is finance that enjoys the highest premium,
which is driven by the gap in demand and supply.
Compensation Philosophy and Pay at Risk
Most organizations within the retail fraternity are
still working on a concrete pay philosophy. The
industry is in the early stages towards building a
consistent approach on how wage management and
talent differentiation can be done. The anchor of pay
for defining pay philosophy dramatically changes
from firm-to-firm. Organizations choose multiple
anchors for deciding compensation based on roles
and levels. However, a fairly large segment of the
industry is using Total Fixed Pay as the key anchor.
In line with the services industry, retail has worked on
making variable pay an integral part of the total payouts.
While the retail industry has embarked upon the journey
on having ‘pay at risk’ built in the offering – ensuring
that it drives the objective of pay for performance, the
percentage payouts are not at par with market averages.
At the junior management levels, the pay mix is fairly
similar to the market. However, as the management
level progresses, the dependence of variable pay does
not grow substantially. The difference is particularly
at the top management level. Across industries, firms
place almost 25-30% of the top management salary in
variable pay. For the retail industry, this is at around
22%. In addition, many firms in the services space
provide long-term incentives in the form of stock
options or RSUs. This phenomenon is still getting
discussed/evaluated across firms in the retail space.
Typically, the revenue generating functions (direct
or indirect) have higher dependence on variable
pay as compared to support functions. The trend
is similar for retail. Across levels of management
– core functions (teeth) have higher dependence
on variable pay. Particularly, at the top and senior
management levels, the difference is visible. On
costed benefits at large, the distribution is similar
for both core and support. This is because benefits
are largely linked to levels and not functions.
Salary Increase
Improvements in the market sentiments have led to the
expectation of growth of retail in India. It is a massive
manpower-oriented industry that recruits a large pool
of employees. However, there is huge scarcity of skilled
retail professionals. The industry is projecting a salary
increase of 10.7% for 2016. This was 9.5% in 2014. The
salary increase projections can be directly correlated
to expected growth in the industry. In addition to this,
lack of trained retail professionals is also causing a
significant dent in the overall compensation budget.
Over the years India Inc. has adopted a fairly
stringent pay for performance norm. Retail in India
is also embracing the pay for performance concept
with open arms. The differentiation that a top talent
receives over an average performer is 1.8 times. This is
one of the highest across India Inc. Given the current
pressure on cost, companies are maximizing their
investments in people by identifying and focusing
on fostering engagement of their key employees.
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