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Employee- centric HR policy

Some of the firms that are voted as 'best company to work for' have employee-centric human resource policy including no-layoff. The logic is that if you take care of your employees, they will take care of the customers. Some examples I was glancing through have performed well financially.

So is it justifiable if a software firm employing more than 50,000 employees decide to defer annual salary hike stating growth concerns? Let's do a small back-of-the-envelope number crunching. Employee cost for software firms account for 50-60% of their cost. So a 10% increase in salary would mean 60 percentage points (0.6%) adverse impact on the profit margin. Even if one assume some portion of employees will be promoted and they need to be paid a higher salary, the outermost impact on profit margin would be 100 percentage points (or 1%).

The question is when a company is growth in excess of 20% on year-to-year basis, but have posted sequential dip, is it a right decision to defer annual salary hike citing bad business environment. My feeling is that cost of dissatisfaction among employees might be a greater drag than the 100 percentage points impact on margin if the hike was given.


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