Luring talent with higher salaries — a short-lived trend?

Higher pay is often doled out to talent, which, in turn is expected to bring in value to the Company's business at par with what they're making

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The talent market today is one of the most dynamic ever. There is shortage of quality talent across functions, which is posing challenges for recruiters. Dearth of skilled talent for critical functions has been forcing recruiters to offer lucrative incentives to onboard them. To some, these incentives are offered in the form of better work-life balance options or even joining bonus. However, the go-to, age-old way of attracting as well as retaining critical talent has been to offer compensation higher than the market average.

For instance, Facebook, one of the biggest employers in tech, globally, offers tech talent, compensation which is 25 per cent more than the market average to attract and retain them.

“For critical roles or for talent possessing hot skills, many employers are willing to stretch their pay”

Chandrasekhar Mukherjee, CHRO, Bhilosa Group

Chandrasekhar Mukherjee, CHRO, Bhilosa Group, explains that offering compensation higher than the market average should be viewed strictly as a business decision. He believes that companies undertake such a decision to secure a dominant position in the talent market. Further, such commitments are generally made by the employer only for talent critical to business operation. “For critical roles or for talent possessing hot skills, many employers are willing to stretch their pay brackets and offer compensations higher than the market. This lures top talent,” he said.

Mukherjee clarifies that such business strategies are employed when an employer’s brand is either not popular or has no stand in the market. This generally happens when the business is still in the building phase.

Higher pay is often doled out to talent, which, in turn is expected to bring in value to the Company’s business at par with what they’re making. Further, employers can also offer higher pay when they are not in a position to match what their competitors may be offering in terms of other employment benefits.

The ‘hot’ or ‘in-demand’ skills, as Mukherjee mentions, continue to change for businesses as they grow and evolve. In today’s world, the ‘hot’ skills are primarily possessed by people with a background in tech. Anil Mohanty, head of people, Medikabazaar, admits that he hasn’t ever seen the talent market as hot as it is for tech today.

“The primary issue here is supply and demand. As more and more companies emerge, there are more players in the market vying for the same set of talent. Hence, an advantage in any form — compensation being a big one — is a plus for a recruiter and is an important business strategy employed by the employer,” he says.

However, higher packages also have certain risks. The strategy may even backfire for the employer.

“There needs to be a shift in this ideology of offering more and more in terms of compensation. A mix of outsourced talent — people hired on requirement basis —and talent grown internally can be a welcome revision to the workforce, which can somewhat disrupt this trend”

Anil Mohanty, head of people, Medikabazaar

Mukherjee calls it a gamble, where the employer bets on an external talent, whose potential output is still a question. After all, he points out, that a talent’s high performance in the previous organisation may not necessarily translate into a high output in the new role.

Further, paying a new hire at a greater scale can also cause rifts within the organisation as the existing employees in different functions may feel discriminated against or disadvantaged.

Anil Mohanty explains that the phenomenon has peaked at the moment in tech hiring in India, as the scenario resembles the bidding process in an auction. One company offers x, while the other offers x+1, and so the figure keeps on growing. He, however, questions this trend and believes such recruitment and business strategy will be short lived.

In fact, industry experts tell HRKatha that the trend — which is primarily seen in the tech space and that too because of startups mushrooming everywhere— may last only for two to three years. Some of these new companies are able to obtain heavy funding, which they invest in developing an internal talent pool. The bubble will burst when the funds stop flowing in and when the direct competition with the already established bigger companies in the space — in terms of output — becomes more apparent. Then, maintaining the high pay scales may be difficult for these startups.

“There needs to be a shift in this ideology of offering more and more in terms of compensation. A mix of outsourced talent — people hired on requirement basis —and talent grown internally can be a welcome revision to the workforce, which can somewhat disrupt this trend,” suggests Mohanty.

1 COMMENT

  1. Very well said…the trend isn’t in the direction of sustained growth, it is seeming so sporadic to burst. That said the situation is seeming a pandemic in itself, sooner the out burst of such growth higher disciplined workforce ethics can be achieved

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