Will Indian employers cut down on employee perks just like Google did?

• As slowdown blues pinch, the quickest way to save money is to cut down people-related costs.
  
• Trimming of perks is likely to be restricted to the IT/ITES industry and some others.
  
• Some perks which were used as incentives to get people back to office, have slowly been toned down or done away with.

There was a time not too long ago when perks offered at Google were the talk of the town. Apart from a lot of usual stuff, there was free food, snacks, free onsite gyms, massage therapists, decompression capsules where you could catch a nap during the day, onsite laundry services and what not. Recently Google cut down on some of these perks to drive down costs. Coming on the heels of massive layoffs, this made news. Will Indian companies follow suit?

“Organizations are proliferating a cultural shift towards responsible use of resources and improving efficiency. They are also continually benchmarking with the peer firms and deciding on their positioning on compensation and benefits offerings. This can be construed as building alignment with the market and may not truly represent a larger trend on reduction in employee perks” says Prateek Gupta, senior consultant, Aon, a human resource consulting firm.

With stress on protecting cash margins, companies likely to cut down on people costs

Following the Covid-19 pandemic, and the Great Resignation, there was a surge in hiring and demand, which led to an inflationary economy. In India, foreign businesses and Indian businesses heavily dependent on overseas markets are being affected by the global macro slowdown. For at least the next 12 months, protecting cash and margins will be a crucial performance metric for businesses.

“Everybody is trying to balance growth and margins. Since the growth is going to be muted, they want to get to a healthy margin that will compensate for muted or less than projected growth. So companies will focus on cash conservation and the margins. Whichever businesses have a high reliance on people costs, will come under a lens. There is a bit of a rationalization that is going to take but the rationalization is not going to be to the extent of what we are witnessing coming in from the West,” says Sandeep Chaudhary, CEO, PeopleStrong, a human capital management SaaS platform.

As we know, the IT Industry is saddled heavily with cost pressures, and naturally, employees will be the subject of scrutiny. “With enough business not coming in and on the contrary, carrying the 2022 baggage of employment offers already rolled out, the quickest way to save money is to cut down people-related costs. Any cost-cutting measure helps companies to marginally cross over turbulence,” says Pratik Vaidya, MD & chief vigilance officer at Karma Global, a tech enabled HR & Compliance Organisation.

Any trend that comes from the West, it is picked up in South Asia and many Indian companies will seize this as an opportunity to make certain practical adjustments to sustain business therefore some cosmetic changes are bound to happen here as well. “Free snacks and soft drinks, shuttle services, fitness sessions, yoga classes, on-site massage therapist, and general office accessories and equipment are some perks that have been cut or removed,” says Vaidya.

Indian companies have been giving out perks to incentivize people to come back to office, but now those have been toned down as well.

“I think this trimming will be restricted to IT/ITES industry till such time they turn around the corner and maybe at will, some other industry organizations will follow to some extent but overall, there will not be a big dip in perks enjoyed by people and given by other industries in India,” says Vaidya.

Indian employers still willing to keep perks on

“While tech bellwethers in the West are trimming down the perks, their counterparts in India are seen designing new ones to attract and retain employees. The need and importance of these perks is high in a hiring market. The current active talent demand across key tech cohorts, though low in comparison to a year ago, is sufficient to keep talent in churn,” says Kamal Karanth, co-founder, Xpheno, a staffing company.

Despite a slow year, tech global capability centers (GCCs) in India had a high talent demand of over four lakh candidates for FY23, with a current active demand of 30,000. The IT sector, including tech services, products, and startups, has over 112,000 active job openings despite market challenges. The talent demand outlook for FY24 is expected to be similar to FY23.

Attrition rates among tech cohorts remain significantly high in the over 15% range as the best talent continues to be poached and exchanged between employers. “While expansion hiring is a choice, replacement hiring isn't. With a sustained demand for top talent, employers know talent is precious and replacements are expensive. In a larger context, the comparative costs of keeping the perks on is lower compared to the costs of hiring, training and orienting,” says Karanth.

He adds that amidst a larger austerity script, it is also an equally important messaging to resize or remove the perks. While the true dollar value of removing perks is debatable, it is a signaling that the enterprise is in no shape for extravagance.

Employers incentivizing employees to return to office

There could be another reason while Indian employers are still trying to woo their employees. The pandemic affected employees from all these industries which caused people to work from home for more than two years.

After getting acclimatised to this home working, returning to the office for all the days has not been the preferred option for many of them. Of course, a majority of the tech workforce refuses to come back. In fact, many companies have found it difficult to get their employees back to office.

“The need for the perks is only elevated given the current frictions around getting employees back to office,” says Karanth.

This trend is particularly prevalent in the tech industry, where many companies have already announced plans to offer a hybrid work model or fully remote options for their employees.

This may not translate into perks as we know them, but may include facilities that enable employees to adapt to a hybrid work mode. “Our survey indicates that organizations moving towards hybrid or back-to-office setups have been proactive in extending support through measures like relocation assistance (40% of responding organizations) and home office set-up allowances (53% of responding organizations),” says Gupta.

Perks will remain but with a focus on corporate wellness

Some of the other perks which were used as incentives to get people back to office, have slowly been reduced or done away with.

“Before the hybrid model could become a trendsetter in 2023, sometime in mid 2022, organizations were incentivizing employees to return by offering discounted meals, commuting benefits etc. But with the situation becoming near normal, and with companies recognizing employee engagement as crucial to performance and willing to add flexibility to office job and occasional working from home, have diluted the resistance with hybrid approach thereby softening the perks payout on the other side. But companies will have corporate wellness programmes to show its value and care for them,” says Vaidya.

So with near normalcy in office, perks will be there but these will be mainly to attract and retain employees and for appreciation and recognition. However, some of the ‘cool’ perks are likely to go.

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