As corporate India enters its third appraisal cycle, there seems to be a mindset shift in assessing employee performance.
Over 30% of organisations have scrapped performance rating based on the conventional bell-curve method, while a small but growing section of companies have stopped individual performance rating altogether. Organisations that have moved away from the performance rating system have grown from 6% in 2020 to 10% in 2022. Instead, these organisations are relying on assessment tools like continuous feedback and scorecard achievement, shows the 2022 Workforce and Increments Trends survey released by Deloitte Touche Tohmatsu India LLP (DTTILLP).
There's also a rising trend of organisations looking at salary corrections, with 45% organisations expected to give increments by looking at the employee’s current compensation and taking into account the market value. The top performers, meanwhile, can be expected to be rewarded with 1.7 times the increment compared to an average performance. Employees can also expect an average of 7.5% increment on promotions, which have marginally gone up to 12.4% this year.
The annual survey carried out in December, 2021, saw participation from around 450 organisations from seven sectors and 27 sub-sectors.
The moving away from the standard, habitually practised bell-curve method for performance assessment is noteworthy, as organisations seem to be open about giving increments to everyone instead of a few when the company performs well, says Anubhav Gupta, partner at DTTILLP.
The trend of doing away with performance ratings is being led by the ITeS sector. About 4% companies did this in 2020. This year, 14% are. IT and consumer products companies (both at 13%) and services sector (12%) follow close behind. Financial sector seem to be the most resistant to doing away individual performance ratings, with only 2% actually doing so.
To combat the talent scarcity, 90% organisations are intending to give out pay bonuses, and four out of 10 firms will pay over 100% target bonuses to retain existing employees this year. With growing focus on environmental, social and governance (ESG), 7% organisations are creating rewards and incentive programmes linked to it, the report states.
In terms of non-financial incentives, companies are continuing to focus on job enrichment, career management, employee upskilling, increase in health insurance coverage and flexibility as ways to retain and attract talent.
While organisations are dishing out one time perks, ranging from upskilling skills to motorcycles to attract talent, Gupta is skeptical how sustainable this will be in the long run. “Increments are currently being driven predominantly by the local labour market conditions. Where increments go from here on will be a function of economic viability and fundamental business growth over the medium to long term,” he says.