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Unit 12: Welfare

"Besides," the Chief Financial Officer, Shastri, intervened, "variable pay is a great way to Notes
control costs and improve productivity. Not to mention that such a system automatically
attracts high-calibre people."

"Yes, when the going is good in the market, there is no problem with variable pay," noted
Sinha. "But when the markets crash, like they have now, your profits shrink. Do you then
ask people to forget all the hard work they've done, and say 'sorry, can't give you any
increments because we've had a bad year'. Believe me, it will take less than six months to
clean out talent from this company. Don't forget that the next year is going to be equally
bad for FMCG companies."
"The IT industry is not only benching people, but asking them to take pay cuts," pointed
out Shastri.
"May be," retorted Sinha. "But how many code-jocks can join insurance, banking, pharma,
or any other industry as marketing heads or even CEOs? And asking people to deliver 15
per cent growth in a market that is shrinking is the surest way of losing them."
"Actually it is worth looking at what is going wrong with the system," said Behl. "As I
understand it, even shop-floor workers - whose variable pay is linked to productivity -
are affected since the company has cut back on production to liquidate dealer inventory."
"As far as I can see," said Kesaria, "it seems to be a problem of implementation. May be we
didn't communicate adequately, perhaps we need to tweak our measurement systems,
review them more frequently and reward people closer to the date of their achievements."
"That is a good idea," said Behl. "Money may not be the only reason why people work, but
it is one of the biggest reasons. Besides, a change like this needs significant lead time. It's
a cultural change and people must be prepared for it."
"I would have loved to do this over a period of one year," defended Arora. "But I was asked
to implement it within three months of the board deciding on it. Besides, where is the top
management commitment to this initiative? Who is the champion of this variable pay? I
could be, but it will have more credibility if the CEO also showed that he was committed
to it."

Questions
1. How to convince people like Mathur that variable pay will actually help them in the
long run?
2. How to achieve a buy-in across the organisation?

3. How to rectify some of the errors the company may have made in its implementation?
4. Finally, should the company scrap variable pay and return to the fixed system?
Courtesy: Business Today, June 9, 2002.

12.7 Summary

 Labour welfare is an important aspect of factory life: the added incentive that enables the
workers to lead a decent life in the midst of urban congestion, rising inflation and poor
living conditions. Labour welfare is a wise investment that helps a firm attract, motivate
and retain people both in times of prosperity and adversity.

 There are several agencies involved in the labor welfare work namely the Central
Government, State Governments, Employers, Trade Unions and other social service
organisations.

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