Should HR claim incentives for reducing employee costs?

Amidst the current economic slump and pandemic-induced recession, businesses are under pressure to cut costs and also boost morale across the organsiation, without compromising on quality, head count and employee-engagement initiatives. Yet, there have been massive job cuts to balance out the losses many businesses have incurred in the last couple of months. The load on the human resources department has surely grown, given the fact that it is already working towards bringing down the costs. The question that emerges is, whether or not HR professionals should claim incentives for reducing costs. HR experts believe it is not necessary, because after all, they are just doing their job. They also list out the cons of having such a strategy in place.

“If an organisation wants to achieve a specific as an overall cost-saving measure, and  has formed a cross-functional team with HR as one of them, then incentives can be considered, but not on a regular basis.”

Ravi Mishra, senior VP-HR, Global Epoxy Business, feels incentives can slowly become poisonous. “They work as a negative element and people get habituated to it. Incentives are designed to reward those who do something extra. Incentives are always dependent on quality and quantity of services. Because of incentives, the team spirit goes down and people try to become individual stars. They focus only on accomplishing their job, ethically or unethically, without worrying about the company’s performance. They tend to get selfish.” He asserts that the objective should be to make the team win. He is keen to reward individuals for doing their work well, but not very keen on incentives. “If somebody has gone out of their way to get their work done, they deserve an award. That will only motivate them to do better. There’s a difference between awards and incentives. The latter can make an employee an addict,” Mishra opines.

“If you really want HR to be recognised for their performance, they should have a good performance bonus in their compensation structure.”

Rajorshi Ganguli, president and global HR, Alkem Laboratories, also dismisses the concept of incentivising HR professionals for doing their job. However, he does say, “If there is a specific project an organisation wants to achieve as an overall cost-saving measure, and if it has put together a cross-functional team with HR as one of them, incentives can be considered, but not on a regular basis. The work of HR becomes negative otherwise. They will be incentivised for cutting employee costs, which does not lead to a healthy atmosphere. It shouldn’t be a practice as that will vitiate the atmosphere,” he points out.

Many are of the opinion that minimising costs of an organisation is part of HR professionals’ work. To give them extra for the work they are supposed to do seems unnecessary. However, Rajeev Singh, CHRO, ATG Tires, Yokohama Group, feels the discussion should rather be on whether or not HR should be paid incentives for recruiting people and meeting targets, just like the sales personnel. “Sales people get incentives for selling the product, not for withdrawing the same or losing the customer. I feel their compensation structure should have a fixed and variable pay. Typically, the incentive structure for the sales people is at 70:30. A similar kind of pay scale should apply to HR as well. I don’t think the HR has the same split as the sales. If you really want HR to be recognised for their performance, they should have a good performance bonus in their compensation structure. Then there will be a performance indicator.” Singh also echoes the general sentiment that it’s an HR’s job to manage the ‘Hire to Retire’ cycle in a respectful and gracious way.

“Incentives work as a negative element and people get habituated to them. Because of incentives, the team spirit goes down and people try to become individual stars.”

Clearly, HR leaders believe that the human resources department is not doing anything out of the box by cutting costs, and therefore, the question of incentives does not arise.