India Inc unlikely to delay festive bonus despite slowdown
Experts say timely payouts could boost consumption in crucial festive season.
Leading employers across sectors such as Hindustan Unilever, ITC, Godrej Group, Axis Bank, Future Group, Honda Motorcycle & Scooter India, Maruti Suzuki, RPG Group, BigBasket, Grofers, Puma, Panasonic and Dixon Technologies are handing out bonuses to employees, several company and industry executives said.
The incentive includes either a special bonus for the festive season or a sales incentive or bonus payout for white-collar executives and managers in September-October. The blue-collar workforce, mostly in factories and on shop floors, too will receive the statutory bonus that is a portion of their basic pay.
Onam Payouts Boosted Sales
Firms and consumer goods makers pointed out that the payouts for Onam in Kerala — made in the first week of September — had led to a 3-4% rise in sales over last year, tempering initial fears of a washout during the festival season.
Asked about the impact of festive payouts, ITC executive director B Sumant said the upcoming season will provide opportunities for consumption to expand.
Others said more steps were needed to revive consumption. Godrej Appliances business head Kamal Nandi said festive bonus alone may not be sufficient to boost sentiment unless the government announces a bigger stimulus package. “A big stimulus can bring positivity among consumers, which will then boost consumption. Otherwise, the festive payout will go into conservation.”
Companies are also sceptical about a pick-up in rural demand, which has slipped into a trough in the past few years. India Inc, however, is hoping that the first good monsoon in five years will revive rural sentiment. Marico MD Saugata Gupta said that while some categories could see an uptick in demand, the overall slowdown in sales will take some more time to improve. “Consumption continues to be soft, but we expect the monsoon and government steps may boost consumption after 2-3 months,” he said.
Indian consumers are cutting down purchases amid an economic slowdown and volatile stock markets. The GDP growth rate fell to six-year low of 5% in the June quarter. International Monetary Fund and Asian Development Bank have lowered growth forecasts for FY20 to around 7% on a weaker-than-expected outlook for domestic demand and concerns around fiscal shortfall.
“There is no change to our intent to pay, quantum to pay or schedule to pay,” said S Venkatesh, president, group HR, at RPG Enterprises.
Axis Bank’s HR head Rajkamal Vempati said the bank will make incentive payouts to its white-collar sales force around October. “The quantum of incentives will be in line with other years,” he said.
Recruitment and staffing firm CIEL HR Services’ CEO Aditya Narayan Mishra said most companies would pay out sales incentives and statutory bonuses around October. The larger ones, he said, will not delay payouts to keep negative sentiment at bay.
‘Auto sector in trouble’
“However, the auto sector is likely to face trouble, given that companies are shutting production lines for a few days. Some of these companies may defer bonuses to the blue-collar workforce. Some smaller companies may also delay payouts, since they are more likely to face liquidity issues,” Mishra said.
Honda Motorcycle & Scooter India (HMSI) said the Diwali bonus is a part of the wage agreement which the company inks with permanent workers and that the payouts will not be held back.
“It is a legal compliance. Besides, automotive is a cyclical business, there are ups and down in the industry. We do not want to affect the morale of our workers by holding back or cutting down on any such incentive,” said Harbhajan Singh, director general, corporate affairs, HMSI.
A spokesperson for Maruti Suzuki India said that despite “the current tough situation, the company will keep the same payment policy for festivals as usual”.
Mahindra & Mahindra declined to comment.
Several HR experts said senior management employees are unlikely to get any payouts this year and a clutch of companies are instead thinking of rewarding them with employee stock option plans (Esops).
India’s festive season — which begins with Ganesh Chaturthi — is the biggest shopping period, accounting for 35-40% of the annual sales of consumer-facing companies.
While FMCG, apparel and retail segments have been battling a slowdown in consumption for over three quarters now, smartphone and home appliances industries saw a dip in sales beginning July. Car sales fell to a twodecade low in August.