Buffeted by the turmoil unleashed by the Covid-19 pandemic, and a bunch of companies trying to save jobs, even while India Inc struggles to meet payroll commitments. Postponing pay increases and incentives, reducing marketing and operating expenses, renegotiating supplier contracts, across-the-board salary cuts, and deeper salary cuts at higher levels are some of the options that companies have been exploring as they realize that when business cycles come and go, how they respond makes their reputation.
“We are seeing an interesting difference in the current scenario compared to the events in 2009 or 2001: companies are cautious and compassionate,” says Anandorup Ghose, Partner Deloitte India, that most companies are focusing on finding multiple alternatives to maintain liquidity before considering layoffs.
Flipkart, PwC, RPG Group, Future Group, Deloitte India, and Panasonic, among others, have ruled out layoffs and are looking for other ways to cut costs. “These are extraordinary times and we will do everything in our power to protect the livelihoods of our people,” Harsh Goenka, chairman – RPG Enterprises"
They have taken initiated proactive measures to keep all employees safe and are postponing promotions, increments, and bonuses to employees in India, said Shyamal Mukherjee, PwC India chairman. Partners and executive directors would get a 25% pay cut. A source from Deloitte told ET that the most important thing is to care for people and avoid job cuts. Meanwhile, Flipkart CEO Kalyan Krishnamurthy recently reassured employees that there will be no layoffs or wage cuts.
There are several steps before companies reach job cuts, says Nitin Sethi, partner, and CEO of Aon India Performance Rewards and Organization Consulting. Companies begin by reducing operational shortcomings and costs that extend during periods of growth and investment cycles, followed by a reduction in the percentage of salary increases, if any, deferring pay increases. Reducing learning/human resource budgets follows, and finally, salary cuts at higher levels and then at all levels. These steps are usually posted when the Job Cut button is pressed, "Sethi said.
Kaustubh Sonalkar, head-HR, Essar Group, said he will discuss strategic ways to reduce costs, and that layoffs are not being considered at this time. Sumit Mitra, head of the HR and corporate services group at Godrej Industries Limited and associated companies, said that while it is too early for a specific labor cost strategy to come out, non-labor costs have now been reduced. On trips, events, and external sites, as well as others which are not business-critical.
In addition to salary cuts, other measures to help cost optimization: cash conservation agenda may include hiring freeze, reduced capital expenditure, reducing any outsourced activity to the bare minimum, reassessing real estate/ office requirements, shortened work week, etc, said Arvind Usretay.
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