Firms pay more to curb attrition

Manufacturing sector sees high churn in mid-level management

The manufacturing sector is seeing a 4-5 per cent churn in mid-level management against 1-2 per cent a year ago. To deal with the problem, firms are raising compensation packages and hiring more executives to build a pool.

"The attrition rate in the middle level management has increased to 4-5 per cent in several manufacturing and engineering firms with more opportunities in different positions. And this is having an impact on the compensation package of executives. The sector is looking at offering a 12-16 per cent hike to the middle-level executives with greater job opportunities in terms of cross functional postings," R Sanker, India head of human resource consultancy, Mercer, said.

Maruti Udyog, for instance, is seeing a high attrition rate of 5 per cent in that level and is offering a hike of 10-18 per cent in the compensation package of middle-level executives.

"Last year, the average compensation flow was 9 per cent, while this year it has gone up to an average of 11.5 per cent at all levels," SY Siddiqui, chief general manager, human resource management, Maruti, said.

Maruti said it was studying the compensation level of a basket of top six companies ranging from IT, telecom and FMCG to engineering. According to initial inputs, Maruti is offering a high hike in compensation.

"There is, however, an element of 'catch-up' in our strategy. Our packages have been low in last two to three years and we want to catch up with the comparable basket of companies and the hike of 11.5 per cent will help us catch up with the industry in next three years as well as act as a tool to retain talent," Siddiqui said.

LG is seeing a 3 per cent attrition in that category and is planning to offer an average 16 per cent hike in the package which is higher than last year's level of 13 per cent.

"Compared with last year, the sales have been good this year. Also, we want to be on a par with the market trend to retain senior employees," YV Verma, senior VP-HR, LG, said.

Larsen & Toubro (L&T) is seeing a similar churn of 4 per cent in its middle-level management with nearly 10-12 managers moving out to sectors like telecom and insurance.

"We are facing a challenge in retaining middle-level executives and this year, we are looking at more a 'considerable' hike in salaries with greater emphasis on variable pay. We are also looking a offering various job enrichment programmes next year," a senior L&T executive said.

The reason, HR experts say, is the availability of greater opportunities. "Businesses that are expanding into diverse fields require experienced people to head various departments. Executives are being given bigger roles, which is taking away a huge chunk from these companies," Sanker said.

It is not just a fatter compensation package, these firms are bringing in more executives to counteract higher levels of attrition as well as build leaders. Maruti has brought in 100 new middle-level executives while LG has brought in 15 new people. L&T has picked up nearly 45 executives this year.

"Nearly 35 talented middle-level officials moved out this year. So, the company is looking at building a bigger pool to face any sudden crisis. Also, as a strategic move to build leaders for our expanding business, we have brought in more people than those that have quit," Siddiqui said.

Recruitment firms say the trend is likely to continue for another two years. "There is strong challenge to retain talent leading to a hike in the packages. Also, this is expansion time for many service companies leading to strong demand for experienced executives to head a section," Tarun Bali, CEO of ABC Consultants said.

Others like Bilt is looking at brand building to retain executives. "Bilt is trying to portray itself as a bigger and diverse brand than just a paper manufacturing company and this will help in retaining executives. Our focus in more on training, development courses and exposure to other functions and next year we aim to spend more on training aspect with an average increase in the package," a Bilt spokesperson said.