Traditionally, the variable pay of these employees is determined on several parameters, including revenues and profitability of the firm and the performance of the division or unit he has worked with during the quarter under review.
Now, in a first of its kind initiative, Wipro has decided to add attrition as one of the key metrics to calculate the quantum of variable pay.
Attrition parameter will be applicable to employees in the D2 and E bands, according to the country’s third-largest IT services firm’s revised quarterly performance-linked compensation (QPLC) programme for 2011-12. A copy of the programme is available with Business standard.
Project managers of large projects, group heads and general managers come under the D2-band, while people in the rank of vice-president and above belong to the highest band, E.
While 20 per cent of these employees’ QPLC will be linked to attrition in their units, 50 per cent will be linked to revenue achievement and 30 per cent to PBIT (profit before interest and taxes) achievement.
Wipro had announced to raise employees’ pay from June after its attrition rate in 2010-11 increased to 22.7 per cent from 12.1 per cent in the previous year.
Saurabh Govil, senior vice-president — human resources, Wipro Technologies, said as a guiding principle for ‘New Wipro’, all key decisions in the organisation had linkage to four key metrics — customer satisfaction, employee satisfaction, revenue and profitability.
“With this in mind, wherever possible, this year’s QPLC plan has linkage to the above key metrics. Since attrition has important linkage to employee satisfaction and customer satisfaction, we want to provide a moderate linkage of this metric to the QPLC of senior management. We intend to align the organisation’s key performance indicators to employees’ performance-linked variable pay.
All other parameters were already there in the QPLC policy of earlier years,” said Govil.
Under the new programme, Wipro has also introduced clients’ satisfaction (CSAT) as a criterion for QPLC, again for the first time. This will be applicable to employees in the C1 band and above. “Linkages on CSAT and attrition parameters would be effective from the second quarter of 2011-12,” the company said in a mail to employees last week.
Attrition-based metrics of measurement are common in contracts between a company and its clients. Such contracts also have a credit or penalty system in case the attrition rate goes beyond a certain level.
"In this (Wipro) case, we are seeing that some aspects of client contracts are cascading to the employees, which is quite progressive. This validates the fact that attrition is no longer an HR problem, but it is a business problem," said Amneet Singh, vice-president - global sourcing, Everest Group.
According to sources in Wipro, variable components constitute 10-14 per cent of most employees' total cost to the company.