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Wanna be (more) Corrupt?

June 23, 2011 Leave a comment

There is a proposal in Direct Tax Code to hike Medical Allowance limit from 15000 to 50000.

Many people are not able to arrange valid bills totaling 15000. And therefore get fake bills by paying some amount to drug seller. As the allowance is increased to 50000, maximum people will find it difficult to get authentic bills. So the easiest way out will be to get fake bills by paying some ‘charges’. We save tax and drug seller gets additional money. So both are happy!

If we consider arranging fake bills as corrupt-action, then hiking the allowance will definitely increase corruption.

Government’s reasoning for increasing the allowance is increase in medical treatment cost. However, the same logic applies to Conveyance Allowance; then why not increase it from 800 to 2000? And if no bills are asked for Conveyance, why to ask it for Medical Allowance?

It is also expected that Sodexo Coupons will continue the tax exemption. Conceptually (and legally) the coupons should be used for ready to eat food at or near workplace. However, in market you can purchase groceries and even cosmetics. Some shops can encash your entire coupon booklet at some nominal commission. Is it not corruption?

If the government is planning to revamp the Income Tax rules through DTC, why not scrap all allowances and simplify the payroll structure? Instead of allowances, the tax exempt income limit can be increased so that everyone gets the benefit without requiring a ‘jugaad’.

Government’s response to the scams exposed recently indicate that the Government is in no mood to curb corruption. However, can we at least expect them not to entice common man to be (more) corrupt?

Categories: Uncategorized

Theory driving Practice

December 8, 2010 Leave a comment

Often we hear that things in life are very different from what’s taught in theory. However, every activity or behavior in practice can be attributed to a theory. One such example is CK Prahlad’s idea of emerging markets.

In his thought provoking book ‘The Fortune at the Bottom of the Pyramid’ Prahlad predicted that there is great scope for retail sector in the lower middle class and poor masses. He referred these masses as Bottom of Pyramid (BOP). He advocated poverty alleviation by tapping BOP market and involving BOP in the economic activity.

He proved that the MNC strategy of focusing on middle and higher income group is self defeating. He also demonstrated that the profit margins at BOP are very high. Example- money credit is offered at annual interest of 600% (2% per day) compared to bank interest rates of 12% -15%. Same goes for oil, grocery and water.

And it seems that companies have taken his advice seriously (at least for tapping the BOP market).

Single serve packs for premium brands are now available at roadside shops and the sale from these shops makes a significant proportion of total sales volume. Branded hair oil is available in 1 Rs sachet and even a domestic maid living in Dharavi can buy it every day. She would not have even thought of buying a 200 ml bottle for 40 Rs.

Profit margins for many FMCG companies are now driven by small value items like Rs.1 hair oil, Rs.2 biscuit pack or Rs.5 mobile recharge. Here Prahlad’s theory actually showed direction to companies to build their marketing practices.

Categories: Economy Tags: , , ,

Mirage of Mid-term Pay Hikes

October 11, 2010 Leave a comment

Most of the IT companies are struggling to rein attrition. Some big (and Mature?) IT companies have already offered retention bonus or restricted stocks is the last quarter. However, there are media reports indicating towards mid-term hikes by many IT companies. I doubt if mid-term hike can help.

Employee are looking for something substantial before the next pay hike (expected in April’11). Mid-term hikes will not be as high as yearly hike since these were not budgeted in the annual plan.

Also the hikes will be effective October’10 (not April’10), so employees only get the benefit for next 6 months. Results show that a software engineer earning 5 Lacs will not gain more than 2 thousand a month, post 5% mid-term hike. However, the companies base salary does inflate by 5% for no good.

These inflated salaries will pose difficulty for companies to offer high increments in April’11. And the attrition problem continues! So, a mid-term hike can be summarized as ‘no short term gain but long term pain’. Yet, some companies might go for the hikes. It will be interesting to see what do they gain out of it.

Categories: Comp & Ben Tags: , , ,

Tailoring ‘Compa Ratio’

August 13, 2010 1 comment

Compa Ratio (CR) refers to the salary of an individual with respect to the median (mid point in the salary range). CR offers more realistic and useful insight into an individual’s compensation than the range penetration.

Consider following case: An employee is drawing 0.9 M salary and the salary range for the position is from 0.5 M to 1.5 M with 0.95 M as the median. In this case, the Compa Ratio is .9/.95 = 95%. This means that the person is quite close to the mid point.

However, at times we may want to place employees at 66 percentile or 75 percentile. In this case the formula can be slightly tweaked to replace Median with Target Salary (Benchmark). Thus, CR = Individual’s Salary/ Benchmark Salary

In the above case, if the 66 percentile is 1.3 M, the CR would be : .9 / 1.3 = 69%. So we know that the employee is at 69% percent of the target salary and need salary correction.

Therefore, it helps to calculate Compa Ratio by comparing the salary to Target Salary instead of the Median.

On “Range Penetration’

May 25, 2010 Leave a comment

One of the popular compensation position indicators is Range Penetration. This ration gives position of an individual’s salary with respect to the maximum salary.

And here lies the problem. The rapid growth of IT industry resulted in shortage of manpower. To attract and retain employees companies pay salaries which may not be in line with market and internal salary bands.

In a situation where salary bands are loosely defined and internal equity is not maintained the Range Penetration gives grossly distorted analysis.

Consider following case: Employee is drawing 0.9 M salary and the actual salary range for the position is from 0.5 M to 1.5 M.

In this case, the Range Penetration is (900000-500000)/(1500000-500000) = 40% This means that the employee is at the 40% in the salary range.

However, the salary of 1,500,000 might not be a desired max salary for the band. It might be an exceptional salary offered to that employee due to niche/critical skill. At times such salary might have been offered to get the person on board quickly to prevent the billing loss.  

Therefore, comparing everyone’s salary to 1,500,000 would be disastrous. There can be two approached to address this issue.

First, instead of 1,500,000 take the actual max salary defined as per the salary band (if it’s available). Assume it’s 1.1 M.

In this case, the Range Penetration comes to  67% which is actual representation of the person’s salary with respect to the band. However, salary bands are not strictly defined and governed in many IT companies. In such a scenario the best way is to use Compa Ratios.  

I will take this up for the next blog.

Talent Management- Accommodating Working Mothers

March 8, 2010 4 comments

The world will celebrate International Women’s Day to commemorate the social and economic achievements of women across the globe. While there is a reason to celebrate we must also realize that there is no room for complacency. With time there are new issues faced by women today and occasions like IWD should be used to draw everybody’s attention to such issues.  

I would like to take this opportunity to highlight an important issue; loss of women talent due to career breaks.

Maternity is the main reason for break in women’s career. Other major reasons are children education and spouse relocation. When this break is longer (2 to 4 years) women find it difficult to restart their career. In absence of a robust system to accommodate working mothers women are pushed to extreme choices: avoid taking break or sacrifice career.

Lately the awareness on this issue is growing and many companies have started offering flexi hours and work from home facilities. MNCs have taken a lead here and this has definitely helped the companies retain their talent. However the bigger question is about women who want complete break for longer duration. Do we have a formal system to regain and accommodate the latent? The answer is no!

A formal ‘re-entry’ program at organizational or industry level is the solution. Under the formal program specific career paths will be available for women taking longer breaks at various stages. This will ensure that they don’t loose on career by taking a long break and can join back easily.

It is not wishful thinking or a (women’s) day dream. Such experiments have been successfully carried out in MNCs as well as Government departments. GE has initiated a similar program in 2008 titled ‘Restart’. They had received more than 1000 suitable profiles for highly technical positions! Recently Haryana Government has announced Child Care Leave upto 2 years for their women employees. Such a system provides great relief to women who need to cater to their family needs. And it also helps organizations to regain the women talent which would otherwise be lost.

However, these are the honorable exceptions. Very few organizations have a defined program to facilitate re-entry of women into the organization.

It’s a huge emotional burden for the women if she is not able to take time off for important family matters. And it’s equally frustrating to loose on the career front because of the break. Fortunately the honorable exceptions have proved that there is a way out. If we pursue this matter further then the next Women’s Day can be marked with announcements of such re-entry programs across a broader industry spectrum.

Love Aaj Kal

January 14, 2010 Leave a comment

 

While browsing through course content on Emotional Intelligence and related material on internet I discovered that the ‘difficult situations’ listed everywhere are quite similar. However, I did not find one area which I have seen seriously affecting people at workplace; ‘Unconventional Relationships’ at work.

Convention is in the eye of the beholder. What’s normal for one person may not be normal for another. And nowadays more and more of the unconventional relationships are treated as normal. Live in relationship at work is quite common and ‘offices spouse’ is no more an unexplored territory. However, the problem starts when this affects and interferes with the work.

Consider this; your have a manager who is enamored with one of your colleague or homosexual colleagues. This may be OK as long as the work is going on fine. But when the person flaunts the infatuation or favors the enamored partner the other people may not be able to bear it.

But who will bell the cat and how? The fight–flight response will not always help. Every time you can not fight with the manager or leave the project/organization. It may help to remain unfazed in this situation and mind your work. Now the strong ‘self regulation’ comes into picture.

As relationships at workplace gets more and more entangled, it is even more important for the bystander to be composed and collected. Therefore, the ‘EQ’ workshops must also focus on this area. It will help participants to prepare themselves to face the unconventional relationships at work comfortably.