Promotions to be more selective as attrition rates fall

India Talent Outlook 2024 study found. Organizations may maintain an average of 7.5% increment for promotions to retain key talent. Also, one in two companies could pay at-target or above-target performance bonuses in 2024.

Ad-hoc promotions to retain staff are “in principle wrong,” said S. Venkatesh, group president of human resources (HR) at RPG Group. “People who are deserving but may not have needed to be retained at that time will get demotivated. By giving these promotions, you have not increased the capability of the firm,” he said.

According to Deloitte, attrition at Indian companies in 2023 was about 18.1% versus 20.2% in 2022 and is expected to fall further in 2024.

The co-founder of a leading fintech based in Delhi, which employs 3,000 people said it has struggled with high staff costs and attrition for the last three years. But as funding cooled across sectors, hiring ebbed and “stemmed the attrition rate for us”, the co-founder said on the condition of anonymity. With employee costs falling after a small cycle of layoffs last year, the firm plans to announce “selective promotions” this year.

Many firms that hired senior executives from established organizations had not established proper reward structures, and ended up handing out a number of promotions.

“There will be no out-of-cycle promotions,” the founder of a Bengaluru-based directto-consumer startup with 2,500 employees said, adding the company will retain the regular two cycles a year.

However, some sectors will continue to see promotions as a retention technique. “We and our rivals are expanding and opening hundreds of branches. We need to retain employees and if promotion helps us, then why not,” remarked the HR head of a leading private bank.

Banks have used promotion as a retention tool since they started facing high attrition.