Compensation Strategy is the organizations plan for how compensation decisions on the types and amount of pay are

made, based on the interests of the employees and keeping with the organizations mission and competitive position in the market

INTRODUCTION
Bharti Airtel Limited is a leading integrated telecommunications company with operations in 20 countries across Asia and Africa. Headquartered in New Delhi, India, the company ranks amongst the top 5 mobile service providers globally in terms of subscribers. In India, the company's product offerings include 2G, 3G and 4G services, fixed line, high speed broadband through DSL, IPTV, DTH, enterprise services including national & international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G mobile services. Bharti Airtel had over 246 million customers across its operations at the end of February 2012.

Compensation Strategy of the Organization

Compensation refers to all forms of financial returns & tangible services & benefits employees receive. The Company believes in a compensation strategy aimed at attracting competent employees to the organization, motivating employees towards superior performance and retaining talent. The underlying principles of the compensation philosophy are: External Equity- employees are getting salaries comparable to employees who perform similar jobs in other organization. Airtel is paying competitively as it follows market benchmarking approach. It is critical to understand your organizations competitive pay position relative to the

marketplace therefore it has a telecom forum wherein all the telecom operators within India participate. A survey is being conducted by external partners with all the participating operators in which emphasis is on benchmarking and giving complete comparative data about where our salary stand vis--vis their salary. Internal Equity ensuring that compensation of people doing comparable jobs lie within a defined salary range. Employees are paid according to the relative value of job within the same organization. For this Airtel refers to compensation ratio of all the employees, vis--vis market and then implement corrective measure if required. Flexibility to employees in structuring their salaries. Tax compliant structure The Compensation & Benefits system of AIRTEL stems on four major strategies:

Positioning We do positioning from Granular to Broader level that is the philosophy we follow Considering our business and its diverse functional compensation need, we propose a functional level range Positioning at Individual level - each individual is pegged at different percentile basis his/her level, function and rating. Positioning at Function level - Employee in the same function and level are pegged at the same percentile. Positioning at Industrial level - Employees in the same level are pegged at same percentile.

Salary ranges are built around this target positioning for hiring and increment purposes. We benchmark with Yahoo!, Baxter, Vodafone and TATA at functional level and at industrial level we have best players HUL, Ranbaxy, GE, Pepsico. Differentiation AIRTEL believes in the ideology of clearly differentiating low, average and top performers. There is marked differentiation in the compensation offered to top performers (Superlative Performance) versus highly valued performers. PAY MIX it is the ratio between base salary and incentive pay at target performance. Pay mix is done band wise and it is dependent upon various band these are Band F& 1, Band 2, Band 3- GM, Band 3- VP/SVP) *description of Bands for the table given below Band 3- Senior Vice President, Vice President, and General Manager Band 2- Deputy General Manager, Senior Manager Band 1 -Manager, Assistant Manager Band F Senior Executive, Executive

STRUCTURE : following is an employee compensation sheet to refer the detailed structure of compensation strategy of the organization
Employee Compensation Sheet (ECS) enables you to structure and maintain your compensation break-up. Compensation is referred to as Total Cost to Company (TCC). The TCC comprises of Total Fixed Pay (TFP) and Total Variable Pay (TVP). The flexibility in TCC is to the extent that you can structure the TFP components and not the TVP component(s) of your compensation. PAY ELEMENTS BUSINESS RULES PERK VALUE APPLICABLE Fixed Elements

Basic

Employer Provident Fund Gratuity

Effective 01-Jun-09 Basic has been fixed at 40% of TCC (or existing Basic, whichever is higher). Note:For F-Band(40% of TCC or Rs.44400/- or existing Basic,whichever is higher). 12% of Basic - Mandatory, if covered under PF. 4.81% of Basic Salary. FLEXIBLE ELEMENTS Flexible Elements Available to Band-1 and above only. Hiring amount may be calculated based on the current value of the car.This can be max Rs.3000 per lakh per month. Value of the car has to be determined from the current insurance value of the vehicle. Car must be in third party name - No self hire allowed. Car hiring amount should not be less than Rs.36000.0 per annum. Available to Band-1 and above only. Can be opted only if car hiring is availed. If opted, the value should not be less than Rs. 12000/- per annum. Maximum allowed value is Rs.180000/- per annum. Available to Band-1 and above only. Can be opted only if car hiring is availed. If opted, the minimum allowed value is Rs.24000/- and maximum allowed value for Sr. VP employees is Rs.96000/- , for Band 2 and Band 3 maximum allowed value is Rs. 84000/- and for others maximum allowed value is Rs. 60000/-. Up to a maximum of Rs.15000/- per annum. Superannuation Policy has been withdrawn w.e.f. 01-Apr-08. Company also provides an option to enroll in the corporate mediclaim policy, which is more beneficial than an individual mediclaim policy. Premium amount as per the mediclaim policy finalized with the insurance company at different coverage slabs. Sum Insured Amount per Employee Insurance For Self Self + Spouse + 2 Children Self + 1 Parent Self + 2 Parents 200000 300000 400000 500000 2424 4768 11022 14932 3324 6540 15117 20478 18334 23694 4362 8583 19841 26877 24062 31099 5540 10900 25196 34130 30556 39490

NA

NA NA

Car Hiring Charges/ Car Lease Rental

Fuel and Maintenance Expenses Driver Wages Reimbursement

Perk Value: As per income tax rules. In addition, if hiring amount is more than Rs.180000/- p.a. TDS on rental value will be calculated as per current rates, which will be deducted while making the payment to third party. Perk Value: As per income tax rules Perk Value: As per income tax rules

Medical Reimbursement Superannuation Medical Premium

NA Perk Value: As per income tax rules NA

Self + Dependants + 1 Parent 13369 Self + Dependants + 2 Parents 17276 Club Membership HRA

However, it does not provide any tax exemption under section 80D. Any amount. Available to GM's (B3) & above only on self membership. Company does not provide any Club Membership. Any Amount. If HRA is opted for then CLA can't be opted for.

Company Lease Accommodation - Rent Company Lease Accommodation - Equipment Hiring Charges/ Furnitures and Fixtures Conveyance Special Allowance Professional Body Membership

CLA Rent amount as per CLA agreement. If this is opted then HRA can't be opted. Hiring Charges/ Furnitures and Fixtures amount as per CLA agreement. If this is opted then HRA can't be opted. Can be availed if "Car Hiring","Fuel and Maintenance Expenses" and "Driver Wages reimbursement" component is not opted for. Maximum allowed value is Rs. 36000/- per annum. Any Amount.Note: Not Applicable for F-Band. Professional Body Membership Fee has been withdrawn w.e.f. 01Apr-08.

Perk Value: As per income tax rules Any amount beyond 50% of basic salary and 40% of basic salary in Metro and non-metro respectively is fully taxable. HRA rent receipt in original need to be submitted, otherwise complete amount will be fully taxable. Perk value: As per Income Tax rules. Perk Value: As per income tax rules. Up to Rs 800/- per month is non taxable. NA NA

LTA

Any Amount. Can be claimed twice in a block of 4 years (current block is 2010-13).

Hill Allowance Winter Allowance Hard Furnishings Soft Furnishings Other General Business Rules

This has been withdrawn w.e.f 01-Jun-2008. This has been withdrawn w.e.f 01-Jun-2008. Hard Furnishing Policy has been withdrawn w.e.f. 01-Apr-08. Accordingly, the amount allocated under this head needs to be restructured by the employees in other head(s). Any amount. Applicable to UC Band as per entitlement.

Twice in a block of 4 years can be claimed against original travel tickets/bills only. Claimable tax free based upon proof of travel (As per policy), otherwise taxable. NA NA NA NA

Any Flexi-kitty amount unclaimed during a financial year will be paid as a taxable component in the last month's salary of that Financial year. LTA balance will also be paid as taxable in the last month's salary of the Financial year effective 2008-09. Should an employee's TCC increase during the year on account of promotion / fitment / job evaluation / mid-term review / transfer etc. the employee will be given an option to change his / her compensation structure. Other than the increment in TCC, the employee will only have option to change his/her structure of fixed compensation, if he/she opts for or opts out of elements such as CLA (including revision / hike or termination of existing CLA), Car hiring (owner/car) change or goes for a housing loan and therefore wants to opt out for HRA element. However, the decision to approve any such restructuring lies with the HR Head/Compensation Manager of your BU, which needs to be supported by relevant documents as well. An employee can change his/her structure of fixed compensation from any effective date starting from 1st of last month to the 10th of next month. Any effective date beyond this cap can be processed by only by the Unit HR Manager.

What is the degree of emphasis on compensation vis-vis other HR systems in attracting and retaining employees? The degree of emphasis is on providing effective compensation.

HR system emphasizes on providing Benefits: Income Protection Work life Focus Allowances

Relational Returns Recognition and status Employment Security Challenging work Learning Opportunities Efficiency ( labor costs + improving performance across various parameters) Fairness Compliance

 What is the degree of emphasis on compensation vis-vis other HR systems in attracting and retaining employees? To survive in the turbulent, global business environment, Organization is applying strategies to increase their competitiveness. Thus, the organization considers compensation strategy as an important tool to attract and retain employees. AIRTEL considers compensation to be one half of the contributing factor in attracting & retaining employees and the other half used to attract & retain employees through growth or leadership opportunities, skill & knowledge development, training & development, flexibility etc. Since Airtel is a leader it is not the highest paying brand. But it tries to maintain a balance by framing mark to market approach, which means we should be at par of what market is paying.

Why is there such an emphasis/or not such an emphasis on compensation? Organization has a compensation strategy where employees can remain attracted and retain in the organization. Employees are the most important asset and hence compensation becomes the most important factor. There is a fair amount of emphasis on compensation. Hence factors of motivation such as Progression, Reward, and Participation are incorporated into the system to balance the overall structure. Furthermore career enhancement through leadership and development programs are the key elements that fill in for the absence of compensation being the sole component in attracting & retaining employees.

How does the strategy impact the pay structure?

 Organizations Pay Level Given the strategy of the organization is the pay level in line with the strategy? Does it follow a uniform pay level compared to the market across all functions or does it discriminate against specific functions or/and levels; explain why?

Organizations Job and Pay Grades The no. of job grade and pay grade

If broad banded, the bands and the sub-bands Managements Bands and Levels

BAND LEVELS BAND 3 Senior Vice President, Vice President, and General Manager BAND 2 Manager BAND 1 BAND F Deputy General Manager, Senior Manager, Assistant Manager Senior Executive, Executive

The Ratio of TFP and TVP for various levels / Bands are as follows: BAND Variable BAND F & 1 15 BAND 2 BAND 3- GM 25 Band 3- VP/ SVP 30 NON SALES Variable Fixed 10 85 12 80 15 75 20 70 80 88 85 20 Fixed 90 SALES

Do you think the organization aligned? Can you explain?

is

internally

Yes, the organization is internally aligned since it emphasizes on the internal equity by developing a relationship that form a pay structure which support the work flow and also ensures that their behavior is directed towards the organization objectives. Banding takes care of the compensation structure to be unbiased and uniform across functions & departments. If at any point the

compensation is high or low for a certain band it gets leveled during an appraisal & potential appraisals. Do you think the no. of pay grades are enough or more or less? The numbers of pay grades are more as compared to other industries. Airtel has a more granular framework because in telecom industry overall this is the patent structure and it also try to benchmark it with other telecom industries. If the organization is broad banded, can you explain the rationale in the banding? As a consequence of the no. of grades, do you think the organizations pay differentials are in line with the market? Yes, the organizations pay differentials are in line with the market because Airtel benchmark with other telecom players in the market like Aircel, Vodafone, Idea etc. Pay Mix Constituents of the Cost to Company The compensation structure of the Company is divided into two parts Total Fixed Pay ( TFP) Total Variable Pay (TVP) *Therefore Total Cost to Company = TFP + TVP Total Fixed Pay- It is the salary which is committed to an employee for payment on monthly basis. It further comprises of two parts: Fixed Pay

 Flexible Pay The compensation elements under Fixed Pay and Flexible Pay are as follows: Fixed Flexible Pay Basic Pay Provident Fund Gratuity ESI (wherever applicable) Reimbursement Pay House Rent Allowance Car Hire Charges Fuel & Maintenance Drivers Salary

Conveyance allowance Medical Reimbursement Med claim Leave Travel Allowance Company Leased Accommodation Club Membership

Total Variable Pay The Company, in line with its compensation philosophy of paying for performance, pays annual performance bonus to its employees which is directly related to the performance of the individual employee, his or her respective Business Unit and the overall Company at large. ( as shown below) Parameter Band 1 Band 3 Band F Band 2

Individual Performance 70% Unit Performance 40% 30% Business Performance Nil

40% 50% 40% 20% Nil

60% 50% Nil

An Employee has one or more of the following salary components in his/her Compensation Structure. The max limit in each component is mentioned below:

Salary Component Basic Pay (whichever is higher) Provident Fund ESI

Limit Fixed limit of 40% of TCC or Rs 3700 12% of Basic pay per month 1.75 % of Salary pay per month

HRA 50% of basic salary for employees staying in metros , Actual HRA received, Amt of actual rent paid in excess of 10% whichever is least *Car Hire Charges the Car * Fuel & Maintenance * Drivers Salary Conveyance Allowance Medical Reimbursement Mediclaim Premium Rs 3000/- per month lakh value (IDV) of Rs 15000/- per month Rs 5000/- per month Rs 3000/- per month Rs 1250/- per month As per the chosen floater sum

Leave travel Allowance * CLA ** Club Membership Fee * Special Allowances

Any amount within Flexible pay Any amount less than basic pays NONE Not fixed Component

* denotes Band 1 and above eligibility ** denotes Employee in Band 3 Anything unusual about the items that are included within the cost to the company -The compensation structure is based on industry norms & practices and compliance of statutory requirements. Hence there is no unusual item within the CTC. Does your organization weigh guaranteed pay more than benefits? What do you opine about the emphasis on the contingent rewards in the organization? Contingent Rewards- The organization has a definite awards and rewards policy for every financial year. Additional financial rewards are provided that are related to performance, competence, contribution, skill or service in the grade. The company in line with its compensation philosophy of paying for performance pays annual performance bonus to its employees which is directly linked to the performance of the individual employees, his/her respective Business Unit and the overall Company at large.

Parameter Individual Performance

Band 3 40%

Band 2 50%

Band 1 60%

Band F 70%

Unit Performance Business/Company Performance

40% 20%

50% Nil

40% Nil

30% Nil

Reward policies address the following broad issues: the level of rewards taking into account market scenario how internal rates of pay should compare with market rates. The basic aim might be to achieve an appropriate balance between financial and non financial rewards. A further aim could be to use other approaches to the development of the employment relationship and the work environment which will enhance commitment and engagement and provide more opportunities for the contribution of people to be valued and recognized.

 Achieving equal pay The relative importance attached to external competitiveness and internal equity The approach to total reward The scope for the use of contingent rewards related to performance, competence, contribution or skill Transparency the publication of information on reward structures and processes to employees. Reward people according to what the organization values and wants to pay for. Reward people for the value they create. Reward the right things to convey the right message about what is important in terms of behaviors and outcomes. Develop a performance culture. Motivate people engagement. and obtain their commitment and

Help to attract and retain the high quality people the organization needs. Develop a positive psychological contract employment relationship and

Can you comment on the non-monetary rewards in your organization? Non-monetary rewards in your organization Non monetary rewards are as important to an organization as its compensation structure. Since money not the only motivator, non monitory rewards are a way of recognizing employees

outstanding contribution towards work over and above their pay. Non monetary compensation is equally important to retain and attract employees. Bharti airtel, believe in rewarding talent whenever and wherever it's due. Through a "Total Rewards Approach", organization offer deserving employees, performance bonuses, guaranteed cash, short term and long term benefits as well as stock options. A fine blend of the aforementioned benefits as well as tremendous growth opportunities in career growth makes life at airtel exciting as well as encouraging. By combining on-the-job learning, involvement in key projects, mentoring programs and exposure across various businesses, airtel offers all its employees, guaranteed job satisfaction resulting in a Total Employee Proposition.

 Is there a rationale for the weights of the various components of the CTC? If so, do you agree with the rationale? Incentive system Identify the incentive (contingent reward systems) system in the organization Incentive system is designed with a desire to reward and differentiate top performers from others. Following are the objectives of Airtels SIP Plan: SIP should be used as an effective tool for performance management. SIP targets are quarterly while circles/sales team are most aligned on monthly targets therefore, month vs. quarter can improve effectiveness. Threshold level of achievement under Sales Incentive Plan has been kept at 80% of the target set for the month. Thus, the employee needs to achieve 80% of his set target in any parameter to be eligible for sales incentive

The new SIP multiplier works simply to calculate the payouts against parameters by applying Hockey Stick Approach. According to this approach: The contingent reward system is a key contributor to the earnings of an employee. Modular structure ensures that employee get awarded parameter wise. So he/she will be eligible for SIP payout for parameters when achievement should be greater than or equal to 80% of SIP target.

Above 100%: the over achievement is tripled by the multiplier means the over achievement is tripled for multiplier for example105% is 5% over achievement therefore, 5%x3=15% added to multiplier i.e. 115%. Below 100%: the under achievement is doubled by the multiplier i.e. the under achievement is doubled for negative multiplier for say 95% is 5% under achievement. Hence, 5%x2=-10% added to multiplier i.e. 90%. Below 80% no payout

Examine its advantages and disadvantages and recommend alternatives We have retained the multiplier on over achievement that ensures more payout. Multiplier of 3 on over-achievement gives an opportunity to earn up-to 250% of annual variable.

Over Achievement Pays More:

With new SIP policy Airtel has introduced is a modular structure that helps in enabling independent SIP payout for individual parameter. So all team members would now be awarded on percentage achievement, it is eligible for mobility, tele-media & dth individually.