Session I Facilitator : Anupal Banerjee, Head - Global Rewards, Capgemini Financial Services

1. Workshop on
Compensation & Benefits
ANUPAL BANERJEE

2. Structure of the presentation
1 Scope and role of C&B Professionals
2 C&B in different industries
Relationship with stakeholders – CXOs; Business Leaders and their
3
group employees; Finance; Market
4 Retaining and attracting talent - external equity & internal parity
5 Policy design and large program roll outs
6 Case Study – I
Employee benefits portfolio – health and wellness; changing macro
7
environment around EB portfolio
8 Case Study - II

3. What are we supposed to do
 facilitate and partner in:
 the decision making of what values, behaviors and skills (either in
isolation or in combination) should the organization reward
 identifying who should be rewarded
 structuring rewards such that it works best
 determining how to fund those rewards
 enable and monitor effective execution
 evaluate effectiveness and re-do the above five as and when
needed
 define a reward strategy that provides monetary, beneficial,
motivational and developmental rewards to employees, and
more importantly, stick to the strategy, once defined
myth – people go in to hr because they like people. new reality – hr departments are not designed to
provide corporate therapy or act as social or health-happiness retreats. hr professionals must create
the practices that make employees more competitive, not more comfortable – source – Dave Ulrich;
Michael Losey; Gerry Lake article, tomorrow’s hr management

4. Compensation and Benefits – Manpower/ Labor
cost in different sample industries
Conglomerate Petroleum & Oil Infra Services Automotive
13 1 Consumption
Consumption
of Raw Operation Raw
of Raw 4 Material Expense 24 Materials
1 Material 8
5
Employee Other 7 Overlay
4 Employee
cost expenditure Expense
50 Cost
Employee 8
Other 45 Employee Others
Cost
expenditure Cost 68
81 80 Others
Others
Others
Pharma Banking Infrastructure - IT
manufacturing
Admin Consumption
Material of Raw
Expense Expense
Material
25 Employee
28 Research 31 Other
36 Cost
Expense Employee Expenditure
45 Cost 43
Employee Travel
Cost Expense
59 13 Employee 54
7 Selling Direct 13 cost Others
Expense Marketing 20
12 3 Others
8 Others
Others 2

5. Who does one work with
 CXOs – conceptualize strategy; design program; execute;
monitor. reward strategy must be anchored to the business
strategy
 business leaders and employees – understand and customize
 finance
 accruals
 budgeting
 utilization
 Payroll
 market benchmarking
 vendors
 other organizations – one-on-one
myth – hr deals with soft side of the business and therefore not accountable. new reality – the impact
of hr practices on business results can and must be measured. hr professional must learn to
translate their work in to financial performance – source – Dave Ulrich; Michael Losey; Gerry
Lake article, tomorrow’s hr management

6. Attracting and retaining talent – base and
variable pay; external equity vs. internal parity
 variable pay Classifications
Gain sharing Profit sharing
proportion of cost saving achieving particular level of profitability
Operating Margin Net Income
Win sharing
proportion of new business profit Goal sharing
meeting targets aligned with business plan
Client Addition
Task Based
key - alignment with goals; impact; simplicity; predictability; fairness; repeatability;
communication & communication
 old vs. new
 is there a problem
 how to resolve it
 stop it from happening going forward – engaging recruitment
myth – hr focuses on costs and therefore cannot be controlled. new reality – hr practices must
create value by increasing intellectual capital of the firm. hr professionals must add value and
not reduce costs – source – Dave Ulrich; Michael Losey; Gerry Lake article, tomorrow’s hr
management

7. Policy design and programs
 policy design
 when to institutionalize a practice – once, twice, thrice, more?
 conceptualize; design and analyse
 financial impact
 revisiting a policy
 programs
 remuneration philosophies
 merit and promotion exercises –
once, twice, anniversary, random
 bonus payouts
 mergers and acquisitions

8. Case Study – I. Compensation and Benefits
Overall scenario:
This year, across industries, organizations have adopted an optimistic yet cautious strategy for 2011-12. There are
signs of slowdown in some sectors (particularly domestic sector) and some are in a consolidation phase.
Chemicals/ Telecom/ Pharma sectors have reported early double digit revenue growth. However, Hi Tech
industry sector seems to be going through a slow growth phase and growth is limited to early single digits, if at
all. Consequently, higher focus has returned to employee productivity, consciously allocated compensation
budgets with the intent of creating a high performance organization. Pools available for increases are
restricted.
With the above background please review the following situation:Company X is a Business Process Outsourcing
Services organization with a global presence. It currently has 10,000 full-time employees. Its current year
revenue is a billion dollars and manpower cost is at 40% of its revenue. Manpower cost split by region is as
follows:
APAC (including India) – 35%; Latin America – 20%; North America – 45%
Inflation rate; averaged out for the region is 8%, 4% and 3% respectively. Attrition has come down from 20% last
year to 14% this year however APAC continues to witness highest relative attrition at 19% followed by 3% in NA
and 4% in Latin America. Market is talking about a 15%, 8% and 3.5% salary increases in these regions
respectively (broad range). The Company has very niche clients and is a market leader in one segment where
smaller competitors are propping up. Hence, retaining employees with special skills is becoming a challenge.
Also, recruiting from the market has shown that recent hires end up getting more salaries when compared with
existing employees. This is creating an internal disparity.In discussion with the leadership team, an overall
pool of 5.5% increase of manpower cost was approved for merit and promotion increases this year, globally.

9. Case Study I contd…
With the above details in mind, please prepare a proposal towards:
 Assume a rating scale and bell curve distribution
 Implementation of merit and promotion increase – what % by each
region. Reasoning behind the decision and total pool available by region
for C&B to monitor
 How will you address the special skill retention concern
 How would you approach determining if there is any old vs new
employee salary disparity. If there is one, how would you address the
same
 Any change in variable plan if the pool you seem to have received is not
sufficient
 Any other details

10. Employee Benefits Portfolio
 define what your organizations’ view on benefit:
 graded or flat
 company provided or employee paid
 to what extent
 portfolio:
 wellness
 group medi-claim policy
 group term life
 group personal accident
 what do you do with the benefits data?
 claims analysis
 future projections
 tweaks in the policy/ insurance carrier basis data
 ever looked at preventive care pattern?

11. Employee Benefits Portfolio contd…
 what can be done within wellness
 decision making: hr, finance and management team
 who really understand before taking a decision
 co-pay or deductible
 co-pay on premium or claim
 maternity benefit
 COMMUNICATION: check video

12. Case Study II
India traditionally has been a rural, agrarian economy. As of 2004, an estimated 27.5% were living below the national
poverty line. Some 300 million people lived on less than a dollar a day and more than 50% of all children were
malnourished. However, our country has seen some astonishing growth since then. Per Capita income has tripled
from Rs 19,000 in 2002-03 to Rs 54,000 in 2010-11, averaging 14.4% growth in eight years. The “Middle Class” has
grown from a mere 44% of total population in 1998-99 to 63% in 2009-10. This growth is creating the expanding
middle class, with more disposable income to spend on healthcare. More women are entering the workforce, further
boosting the purchasing power of Indian households. Thanks to rising income, more Indians can afford better
healthcare today.
While the trend is good, this of course impacts how employee benefits portfolio is positioned and seen in an organization
context. While an organization must continue to strive for providing the best healthcare for its employees, choices it
makes on “HOW” is possibly of greatest importance. Healthcare cost, and with it insurance cost towards
healthcare, are and would continue to rise. It is expected to grow at double digits while manpower cost growth would
be in middle single digits. So, sooner than later, healthcare cost would catch up!
Keeping the above scenario in mind, review the following Group Mediclaim policy and come up with recommendations:
Company Y has 50,000 employees. It has two large plants, one in Gurgaon (Plant A) and the other in Bhubaneshwar
(Plant B). Group Mediclaim policies are different for both the plants. Common policy details are as follows:
 All employees and immediate family members (up to a total of 4) are covered
 Parents are excluded from the policy
 Insurance premium is paid for by the Company
 Lives covered under both policies are 40,000 each
 No of cases exceeding INR 3L as costs were 10 in each plant for the full year
 Average maternity cost for both plants is at INR 25,000

13. Case Study II contd…
Differences in the policies:
Plant A provides for a uniform cover
Individuals lives are covered for Rs 1L each
Families are covered under a floater of 4L each
Premium paid for the year was INR 20Cr
Claim ratio is 110%
Maternity is covered up to INR 50K
Has a corporate buffer of INR 50L
Year on year increase in premium cost is 15%
Plant B provides for a level wise cover
Cover increases as one goes up the job levels. At entry levels, cover is 1L. At middle level cover is 3L and at
Senior levels cover is 8L
Premium paid for the year was INR 28Cr
Claim ratio is 100%
Maternity is covered up to 30K per year
There is no corporate buffer
Year on year increase in premium cost is 14%
Task:
 Compare the two policies and highlight merits and de-merits
 Come up with a new policy, which is a combination of the above two – pick up what suits best. Highlight
rationale.

14. Questions?