As an entrepreneur/founder you have many choices when you set up your company. One of the first few things you may like to think about is the employee policy and salaries. Gyan, the business advisor, recently met a few company founders and they informally discussed this aspect. One of the points raised by John, the founder of a high-growth, four-year old company, was that there have been enough and more debates about the top of the pyramid salaries in recent times. He wanted to take a different line of discussion in the meeting … and look at the salaries down the line. Two companies (names changed for confidentiality reasons) were mentioned and their employee policies debated.
The first company discussed, Great Images, was well known in Bengaluru city. John mentioned that he knew someone whose son, Ganesh, was employed as an office boy in Great Images. While the salary was good, he was employed through an agent and a substantial amount had to be given to this agent as commission. With the economic slowdown, work hours increased… without any pay increase. Ganesh also had to pay more for transport and food. In effect, the net cash Ganesh took home decreased. However, Ganesh kept quiet about this negative impact as he was scared of losing his job. Great Images, is known for its employee friendly policies and is often cited as a great company to work for. John then asked the group "Really? Is that really so? For which employees?" After a minute when there was not much response he asked those present, "What do you do, or want to do in your firms?
Then John spoke about City Technologies, another well known company in Bengaluru. Here the minimum wage is lower than that in Great Images. However, all wages are paid directly to the employees. In effect, these employees get more salary in hand as compared to those in similar positions in Great Images. The founders of City Technologies are taking care to see that the employees at the starting positions in the company get the entire salary and benefits due to them. In the market place, however, the Great Images brand is the one known for its great HR policies and caring approach to its employees!
Hearing this, Kiran spoke up, "Well it is not black and white. Sometimes there are other reasons for outsourcing staff through agents. In such cases, you really have no control over the money they get. In fact sometimes staff can get together to form a group and really harass senior management who are seen as soft and mild. "
Shama, "Yes, I agree it is not so simple, but do you not feel that a company which is said to be caring about its employees and is getting awards for this, does not pay attention to these details? The flip side may be problems from staff, but does that justify such behavior?"
Gyan then opened this issue for discussions to understand what most entrepreneurs in Bengaluru would like to do.
Gyan, "This is a city which prides itself on its culture of empowering all through employment. What practices are you, the future leaders and next gen entrepreneurs following? What practices would you like to set in your company? Today, when we are talking of salary hikes, which employees will get hikes in your company? Will you focus only on ESOP plans and top performers, or will you also look at the other end of the spectrum, those drawing the least amount as salary from your business? These will reflect your beliefs and value systems. As many of you have seen, the way a person treats a junior or subordinate as contrasted to the way he or she treats his senior or boss can be quite informative and revealing!"
Gyan then went on to add, "What is the impact of the change in the bottom salaries as compared to the impact of change in the top salaries?"
Discussions on these aspects went back and forth. In fact one of the participants reiterated that the flip side to being good may be seen as being soft and one could have repercussions because of this. He then said, "You are here to do business and not to do social work."
Gyan summed up this with a few questions to the group, "What motivates you as an entrepreneur as regards your employees? You need to think about the policies you put in place today and the long term impact as also implications… from different angles… and then take a call."
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Nice article. It is true. Salaries and incentive schemes are very tricky.
I think there is a big difference in the way a startup thinks about salaries vs a big company.
For a startup, the most important thing is passion and a great test of passion is whether an employee is willing to take a pay-cut in return for a huge payout ( in form of ESOPs ) if the company is successful. At the same time, cash is the most important thing a startup has in its hand and a combination like this is a win-win situation for both the startup and the employees.
Big companies on the other hand can afford to pay a higher salary, but have a tougher task of keeping the employee motivated with the quality of work they offer. A good company will always make sure that there is a nice balance between the two.
However, there are times when you need to get employees from an agency, especially when the nature of work is not aligned with the focus of the company or when a growth path does not exist for that kind of work in the company. In such cases, it is always tricky to get the contract employee to merge with rest of the team ( they really belong to a different company ) and also ensure that the contract employee gets a fair share of the payout ( it is under the control of their employer ). If a company is not legally accountable for contract employees, I don’t think it is fair to hold them morally accountable for them either.
I have herd a cry that many middle level managers quit jobs to better their earnings, especially in the IT industry in Bangalore. The contract workers hired by them through contractors, may not get salaries to their expectations. This is inevitable, and the salary paid is in accordance of the jobs for which they are hired. I understand that a peon in Central Government draws a salary of not less than Rs. 15,000 pm, and of course it is from the taxpayers money. How can you expect the same from other small firms?