Sep 16, 2004

Bonuses Catching up in India

Economic Times says that Your pay packet can now breach the ceiling.
India Inc, which so far linked bonuses to its top honchos to their basic salary — usually of a few months or a year, is now offering unlimited monetary inducements as project-based or milestone achievement bonuses. No wonder, it’s party time at the top floor.

It’s not that managements across corporate India are signing blank cheques for their staff. But, for now, the signs have started showing at least in the knowledge-based companies. Let’s give you a solid proof: When IBM cut a $700m outsourcing deal with Bharti Televentures, the guys at IBM who pushed through the contract took home $2m, that’s Rs 9 crore, as a one-time bonus. HR consultants say the trend is catching up in the fast growing sectors. In telecom, IT, insurance and retail the annual bonus of top executives is being linked to the earnings growth of companies. In other words, there’s no upper limit on how much an exec can really take home. At least 150 professional CEOs across corner rooms take home pay packets exceeding Rs 1 crore a year, much of it by way of bonuses.

In many cases, companies are also rewarding their top performers with a percentage of earnings (read profit or savings in case of outsourcing) running into crores is cash. Take this as for a pointer: A topline IT major pays its CEO 2% of the preceding year’s net profit plus 2.5% of the incremental profit growth in the current financial year as bonus.