Indian companies hand out benefits to retain middle managers

For example, employee stock ownership plans (ESOPs) have traditionally been the exclusive preserve of senior management and chief executive officers (CXOs). But companies are now using it as a tool to attract entry-level to mid-level talent, ensuring they stay with the company longer.

“Across IT, e-commerce and product, companies have made heavily discounted employee stock ownership plans a core element of their rewards philosophy,” said Jang Bahadur Singh, associate partner, human capital solutions at Indian consultancy Aon. Traditionally, financial services Industries such as , FMCG (Fast Moving Consumer Goods) and FMCD (Fast Moving Consumer Goods) offer equity schemes to top and middle managers.

Ironically, despite the downturn in the job market, retaining key talent remains a challenge.

As the battle for niche talent intensifies, incentive programs are gradually being introduced at all levels. “As these industries start recruiting talent from technology-focused organizations, they are now broadening equity offerings to include junior employees to reflect the reward structures of these technology organizations,” said Singh.

Going forward, he expects the collective incentives and flexible work arrangements that tech companies are accustomed to trickling down to other industries as well.

ALSO READ | Mint Explainer: Budgeting, Buybacks, and the Employee Stock Ownership Tax

Ironically, despite the downturn in the job market, retaining key talent remains a challenge. Attrition rates have declined in IT, banking, startups and consumer sectors over the past year or so, but top talent remains a weak link for companies. Without the right compensation, stock, or career path, middle managers are more likely to leave, making succession planning difficult for the company.

who is motivating

For example, in the banking industry, Axis Bank and Yes Bank have introduced stock units for high performers in their middle management.

“Over the last one and a half years, we have launched employee stock ownership units for high-performing employees in middle management. They have helped us retain and align our executives with company goals.” Rajkamal Vempati, President, Human Resources, Axis Bank said.

at the same time, Mint It is reported that Yes Bank will implement selective RSU for mid-level employees this year as a strategic retention measure for key talents. The bank has not responded yet Mintquery.

RSUs refer to restricted stock units, which are a number of shares that employees receive after completing a certain term with the company.

In addition to RSUs, the company also issues common employee stock ownership plans (ESOPs) and performance shares.

Under an employee stock ownership plan, employees can buy company stock at a predetermined price after a certain number of years. In performance stocks, shares are allocated only when an employee meets goals, stays with the company for a specific tenure, and the company also meets its growth goals in the industry.

ALSO READ | Care challenges insurance regulator, apologizes over Saluja’s Esops

This phenomenon is not limited to the financial services industry, which has relatively high employee turnover rates. Several leading companies in the industrial sector have also taken steps to keep their employees happy.

A Japanese tire major has expanded the number of employees eligible for its long-term incentive program in India. An executive at the company, who spoke on condition of anonymity, said the company has implemented long-term incentives for high-performing employees over a period of three years. “That number has tripled in the last five years,” the executive said. “Long-term grants are awarded to those who meet key talent criteria, whose role is essential and who have no successor. “

Similarly, at spirits major Pernod Ricard, employees are given the opportunity to apply internally for mid- to senior-level management positions in India and beyond.

Mint has learned that Yes Bank will implement selective RSUs for its mid-level employees this year as a strategic retention measure for key talent.

“During the negotiation process, candidates can discuss the option of cash or shares, but this is only one part of the equation and has limited effectiveness in promoting long-term engagement,” said Nitu Bhushan, chief human resources officer at Pernod Ricard South Asia.

Bhushan added: “In addition, we are constantly exploring roles and opportunities with our global teams to ensure that talent from India gets valuable global exposure. Even if a specific role is not yet open, these conversations are ongoing, allowing us to Identify potential positions in advance.”

For tech-focused startups in the early to growth stages, the company’s formative years are the most critical, with most of the money they raise going toward building out their teams. In most cases, companies provide stock options to top executives to support the founder’s vision.

However, they are now increasingly including entry-level and mid-level employees in employee stock ownership plans. Experts point out that amid sluggish sales during the holiday season, the consumer, logistics, e-commerce and retail industries will experience average bonuses, so there is a need to prevent mid- and low-level orders from falling into competition.

ALSO READ | How Religare chief got Care Esops after Irdai rejection

“In the near future, we plan to provide follow-on grants to top performing employees to retain talent. This will include junior to mid-level employees as well,” said Sachin Santhosh, co-founder of Scimplify, a contract manufacturing startup for specialty chemicals , which raised $9.5 million in August from investors led by Omnivore.

Santhosh said the company will explore providing liquidity to employees with stock options in subsequent financings. The company, which is backed by 3one4 Capital, will consider raising a new round of funding in the next 12-18 months.

New-age founders say that for startups that have scaled to profitability, it becomes critical to steady the ship to achieve the next level of growth, and ensuring talent retention is equally important.

Bengaluru-based mattress and home solutions startup Wakefit, which offers shares across tiers, said the potential of employee stock ownership plans would be harmed if they were viewed merely as a retention tool. “For us, ESOPs are about building true ownership and loyalty to the company’s mission. We also offer ESOPs for junior and mid-level team members. The Esop pool has goal-based and tenure-based top-ups, which makes Our mid- to senior-level management team is here to stay,” said Chaitanya Ramalinegowda, co-founder of Wakefit.co.