In the year 2000 when the life insurance industry started and the BPO industry was booming there was a serious shortage of people in the financial services industry. So people were plucked from almost all other industries. Zerox, Canon, Eureka Forbes  were regularly raided for sales people. FMCG companies were raided for marketing people and the pharmaceutical industry was the biggest provider of salesmen.

People were offered salaries far higher than what they were getting. To take an example – a small town sales representative wh was earning Rs. 100,000 a year was offered Rs. 12000 a month. Over all the financial services industry was booming – and like a friend in HR said, the only question was ‘When can you join…no other question was allowed. Then other companies came and said…Oh you are drawing Rs. 144,000 we will pay you Rs. 288,000. Thus inflated salaries got doubled. The industry now had people who honestly believed that they were fully priced at Rs. 3 lakhs, but they were getting offers at Rs. 5L or 6L. Then the salary went to 9L.

Now that the regulator has asked people to reduce costs, almost all life insurance companies are sacking en-masse! Now if you do sack 1500 sales men, you need to sack managers managing them, the managers managing the managers, the trainers who were training them – so the total slaughter goes up from 1500 to 3000.

I heard that Icici Bank has decided to absorb all the people being removed from Icici lombard – not sure, just heard. Sure, Hdfc bank, Kotak bank, SBI can follow suit can they not?

A more radical suggestion is what I have. If the managements were to call all these people who are being removed and renegotiate their salary – and say…’At Rs. 14 lakhs, you are too expensive…we can keep you..other conditions remain the same..but we will pay you Rs. 9 lakhs’…it might work, not sure how many Managing Directors have the guts to try something like this. According to a friend of mine…they would not dare to do it…lest somebody make them that offer 🙂

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  1. Good suggestion, but managers will not take it for the following reasons:
    1. Some idiot higher up (CEO/Board level) decreed absolute headcount reduction, and is tracking it.
    2. Corporate HR policies won’t allow it
    3. The current salary structures say 40% of salary is Basic, of which 12% is PF. If salary is reduced, PF will be reduced, which will lead to a regulatory issue. (Of course no one will have the common sense and/or make the effort to change the structure so that 80% of salary is now Basic pay)
    4. Given that the insurance firms are no longer able to fleece customers with impunity, they are facing some short term economic pressures, and layoffs are a good way for management to demonstrate action & distract attention (yes, I’m a cynic!)

  2. Sacking i fear is inevitable in this situation. When firms believe that all they need to do to get higher sales is hire more sales people and show high number of ads. to get higher brand recall often this is the end result.
    Probably those ppl are badly needed i the industries they came from rather than selling bullshit financial products to no clue customers!

  3. umm..the old sticky wages problem.its exacerbated by the fact that real growth is far below nominal growth (or alternatively increase in purchasing power).this reluctance to take a pay cut is actually a modern phenomenon caused by inflationary paper money.

  4. I am sure Subra, there are companies who will do this!

    You have echoed this view many a times, so there must be someone equally sensible up there in those hallowed halls of power….at least one?

    When you feel or want something with such a great fervor, when every part of your body is praying in that direction, it will have impact, just wait and watch!

  5. The justification of HIGH SALARIES is a paradox situation.,

    Between two persons., instead of sacing one the company cuts the salary of both by 30%, then both persons will be ‘demotivated’ and no one will work 🙁 . IF only is one is sacked then the other will automatically ‘take care of his performance’ & at last if there is no business or work only for one what will the company do with two persons???

    In worst The company may sack one person and cut the pay of the other by 30%!!!!

  6. Manoj I like this!

    When your goals are clear, and you want it real bad, say it loud, write it down, then your whole body wants it. Your body sends out a signal to the whole universe. Then the whole Universe CONSPIRES to make the goal happen…that is the Secret…

  7. Salaries are sticky on the way down – one of the reasons people don’t want pay cuts is that it looks bad on the resume, and doesn’t look nice when you try to take a loan and the bank looks at your salary account and says oh my god and all that crap.

    Another reason is, like someone said above, unless the salary cuts are across the board, they seem unfair – so if I tell someone to take a pay cut, I have to take a pay cut too, otherwise they will be pissed.

    Additionally, companies hire new employees at higher salaries than current employees, so it makes business sense to tell the new employees to take a cut compared to current – but that logic doesn’t work. Plus, the highest paid are at the upper management of the bank, who can EASILY afford a pay cut (and a 20% cut for them = salary of a few employees), but guess what, that logic also doesn’t work. In real life I mean – in theory anything works.

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