New economy promotions can slow your salary increase

Companies are using hyped designations to lop off 2-10% from an employee’s pay package

MUMBAI: So you’ve been promoted. And you can’t help but wear the smug look around office. But before you throw a party for your ‘promotion’, it might be a good idea to look a little closely at your increment letter. Has the company given you a higher designation without increasing your responsibilities or your pay package significantly? If the answer is yes, you’ve entered the world of innovative HR practices.

Your promotion could be a two-pronged strategic lever used by your employer to slash costs and curb attrition. According to human resources professionals and recruitment consultants, companies are now offering bigger designations to employees to slow down their pay hikes by 2-5% or even 10% in some cases.
 
Overall, companies save as much as 20% on their employee costs and also check attrition because people tend to stay longer when given a higher designation, says Rajesh AR, vice-president of staffing firm TeamLease Services Pvt Ltd.

The practice is more common in mid-tier companies that can’t afford hefty pay hikes. “We call them ‘new economy designations’. A fancy designation such as relationship manager, knowledge manager and the likes makes visiting cards weightier. It serves as an ego boost for an employee because people can’t flaunt their salaries but they can their positions,” says Rajesh.

Organisations trade pay hikes for higher designations subtly, through negotiations with the employees concerned, says Kris Lakshmikanth, founder CEO and managing director of Bangalore-based recruitment firm HeadHunter India Pvt Ltd. “A salesman’s job is the same as that of a sales executive. But the term ‘executive’ carries more weight in the society and so, organisations have been using it freely,” says Lakshmikanth.

Consider the example of Mumbai professional Pooja Sharma. Earlier, this 24-year-old public relations professional’s visiting cards showed her as a ‘consultant’. Last week, they were replaced by new ones that describe her as a ‘senior account executive’.

The designation jump hasn’t translated into a big pay jump for Sharma. Earlier, she would get Rs 25,000 monthly and now Rs 28,500. Sharma wanted at least Rs 30,000 after the appraisals but Rs 1,500 monthly proved to be the price for a fancier profile. “Senior account executive sounds better than consultant, and this helps as I have to exchange cards with people,” she says.

Rs 1,500 for Sharma means a big cost benefit for her company.

Marcel Parkar, chairman of HR solutions provider Ikya Human Capital Solutions, reveals that companies save as much as 20-30% if they use this strategy on several employees. He adds that the lines between designations are often blurred and no clear-cut job profile matches the reworked designation.

“Promotions nowadays don’t really mean a change in responsibility. It doesn’t matter to the company whether they have 10 people working as senior executives or 20.”

The tool helps in lateral recruitments too. Instead of giving the 30% pay hike that candidates demand, companies offer a healthier designation and a 27-28% hike. High attrition rates are giving the trend further traction. Aadith Vikram, the managing director of online recruitment site WhereIsMyBoss.com, observes that junior and mid-level employees chase fancy designations. “Different sectors, from banking to insurance to retail to information technology, are facing attrition rates of between 14% and 25%. In addition, there is limited supply of talented people. Employees stick with companies if they get promotions,” Vikram adds.

Expectedly, companies are unwilling to admit to this practice. Bharti AXA Life Insurance’s HR director Priya Ranjan claims the practice is more common in fields that require client interaction, for example, customer service.

Some like Sucharita Palepu, head of talent management group at Satyam Computer Services, see this as a way of constantly creating excitement around a job profile. “People won’t mind a lower salary if the role offered is good,” Palepu says. Both Ranjan and Palepu, however, assert that their organisations don’t indulge in the practice.

So how can an employee differentiate between a real promotion and a strategic promotion? The solution lies in not getting overly optimistic about a new designation. “See if the new designation clearly includes tasks in addition to those in the earlier job profile,” says Vikram.

g_priyanka@dnaindia.net