Why Companies Must Diversify Their Annual Performance Review Beyond Monetary Benefits?

The employment outlook for 2024 in India presents a slightly more optimistic picture compared to the challenges of 2023. As companies conclude their annual performance reviews, anticipation is high for salary increments reflecting sector-specific developments. Despite geopolitical tensions and inflation, companies are implementing employee retention strategies to address attrition concerns and ensure a positive future outlook for India’s growth trajectory.

Performance review season

March and April, the end of the fiscal year, are pivotal months for many sectors as they conduct annual performance reviews. This period is eagerly anticipated by employees across various industries, much like the awaited monsoon rains, as it marks the appraisal season. Consequently, job hiring slows down as employees await their appraisals before considering new job opportunities.

Key trends observed

Studies indicate that approximately 15% more workers seek better opportunities during this time, anticipating wage raises post-review. Many companies have already disclosed their salary increments, with average increases projected to range between 9% and 10%. Although these figures are marginally higher than the previous year, they signify a return to pre-pandemic levels. Top performers or individuals in critical roles might receive even higher increases.

However, considering India’s inflation rate of about 6-7%, an average pay rise of 9–10% translates to a real increase of only 3-4%. India’s diverse and complex market means that the rate of salary increases varies significantly across different industries.

Sector-specific developments

• IT Services Sector: experiencing a decline due to reduced demand from Western markets and a capital freeze in the startup sector. Businesses are focusing on resource optimisation and profitability.
• Banking, Financial Services, and Insurance (BFSI) Sector: Witnessing growth due to economic formalisation and increased government infrastructure spending. Appraisals in this sector are expected to reflect this positive trend.

Attrition and compensation

Post-appraisal, attrition rates often rise, with many employees citing inadequate annual performance reviews as their reason for seeking new positions. Voluntary departures are mainly driven by:

• External inequality of remuneration (comparisons with competitors)
• Internal inequities (disparities within the same business)

Despite global economic concerns, the current job market differs from the Y2K crisis or the Great Recession of 2008. Unlike the past, where career prospects were shrinking and pay stagnating, today’s employment market is becoming more premiumised. Employees with specialised skills command premium pay, and those with in-demand digital talents receive a skills premium.

Employee retention strategies

Organisations are increasingly focusing on employee well-being and benefits to reduce turnover and meet modern workforce demands. Key strategies include:

• Promotions: used strategically to retain talent amidst intense competition.
• Benefits and Rewards: enhanced benefits, diverse work experiences, and increased rewards for top performers.
• Career Development: Investment in personalised career development opportunities through training programmes, workshops, mentorship, and clear advancement paths.
• Beyond Monetary Compensation: Dale Carnegie believes “People work for money but go the extra mile for recognition, praise, and rewards”. Offering flexible work arrangements, career advancement opportunities, comprehensive health programmes, and supportive company culture are a few non-monetary benefits companies have initiated to embrace within their company norms.
• Recognition and Feedback: Regular feedback, performance evaluations, and reward programmes boost morale and motivation. Recognition can take various forms, including bonuses, promotions, or expressions of appreciation.

Future outlook

With strong growth predicted by the IMF, India’s growth trajectory seems good going forward. The corporate sector, as the economy grows, needs to steer these rich but unstable seas with budgetary responsibility and an eye toward the human element of its business. As companies continue to conduct annual performance reviews, they play a crucial role in shaping the future employment landscape.

2024 is a year that will be remembered as a tribute to India’s tenacity and its unwavering quest for progress amid a global landscape full of ambitions, economies, and human endeavours!

The original article written by Kartik Narayan, titled – “Salary appraisals 2024: Is India Inc moving beyond monetary compensation?” was featured in Times Jobs on 21st of May, 2024.

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