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Higher bonuses set to spread cheer this festive season

Cos are set to celebrate this festival season with their employees by paying higher bonuses than last year. Second innings at workplace | Cash in on your contacts

, ET Bureau|
Sep 23, 2009, 07.59 AM IST
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NEW DELHI: Leading consumer durables and automakers such as LG Electronics, Samsung, Maruti Suzuki and Hero Honda, riding the current economic recovery, are set to celebrate this festival season with their employees by paying higher bonuses than last year when sales were sluggish and future uncertain.

But, unlike past years, most of this money may not come back into the consumer market this time, as some employees ET spoke to are not in a mood to celebrate: they would rather invest their bonuses than spend.

The country���s leading consumer durables firm LG Electronics, largest carmaker Maruti Suzuki India, two-wheeler market leader Hero Honda, top retailer Future Group, Hyundai Motors, Tata Motors, Toyota India, Samsung India and Haier India are all expected to give away bonuses anywhere between 8% and 20% of employees��� annual gross salaries.

Most of these firms refused to talk about the issue, saying they were yet to decide on the incentives to be paid around Diwali. ���We shall pay festive bonus to our employees this year, but we are yet to decide the quantum of such bonus,��� said Kishore Biyani, CEO of Future Group, the country���s largest retailer.

Employees of these firms, however, are expecting a better deal this year mainly because of the vastly improved market condition and consumer sentiment. The global recession hit India around middle of last year. The markets cratered, economy slowed down, companies cut costs and salaries, and people stopped spending.

All consumer-centric industries from real estate to retail to consumer products took a hit, prompting the government to announce big tax incentives to encourage investments and consumer spending. The stimulus packages have worked. Car sales, which were dipping since July last year, have been growing since December last, and despatches to dealers have grown 25-30% in the past couple of months in expectation of big festival demand on the back of attractive discounts, low interest rates and better overall sentiment. Consumer goods makers are targetting an even better 45% jump this season.

Samsung, one of the largest consumer electronics makers in the world, is likely to pay slightly higher percentage this time than last year���s average bonus of 200% of basic monthly salary, a company executive said requesting anonymity.

Its Chinese rival Haier India plans to give an average annual bonus of up to 12% of annual salary this year, while last year the payout did not go beyond 10%. Haier will pay a significant portion of its bonus during this festive season, a company spokesman said. Its factory workers will get at least a month���s salary as Diwali bonus, he added.

Maruti Suzuki will give out an ad hoc payment of up to 50% of an employee���s variable pay as festive bonus this year. ���The variable component could be between 10-25% of an employee���s pay, depending on the level of management,��� said SY Siddiqui, managing executive officer (administration), Maruti Suzuki. The company will pay the rest of the variable in April-May next year.

Interestingly, some employees of these firms that thrive on improved consumer sentiment said they themselves wouldn���t spend the bonus on goodies.

Take the case of Rahul (name changed), a marketing executive with Maruti Suzuki in Delhi. He said he is entitled to get as bonus Rs 1 lakh this October, and he would invest the whole amount in gold. Amit Raju, deputy manager (marketing) at Maruti, is planning to do up his parents��� house with his bonus, while LG employee Puneet (name changed) would spend his Rs 65,000 bonus in paying off his home loan.

LG Electronics gives bonus of 20% of gross annual salary every year. That means a sales manager earning Rs 8 lakh per annum will get a festive bonus of Rs 1,60,000.

Although the concept of paying a festive bonus has diminished over the years, many companies, especially in the manufacturing sector, prefer giving such incentives close to the festival season. It is the time when they demand the most from employees, as they increase production and marketing efforts to maximise sales.

While a few companies like Maruti time the variable payouts around the festive season, some companies pay bonuses according to the Payment of Bonus Act.

PepsiCo India, for instance, will give festive bonus to about 2,000 of employees working in factories. This bonus is between 8.33-20% of their annual compensation. The policy is not applicable to those at the managerial levels.

Some companies such as confectionery maker Perfetti Van Melle India gift only home appliances or gadgets to employees every year. For instance, last year Perfetti gifted microwaves to all its employees (from entry level to CXOs) and this year, it is planning to reward employees with digicams and coffee makers.

���Our budget allows us to spend close to Rs 4,000 on every employee during Diwali, although this year, we are yet to decide what to gift,��� said Sugato Palit, HR head at Perfetti.

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