Employees Using Resignations as Leverage for Salary Hikes: How Can Management Respond?

I'm employed with a furniture and fixture manufacturing company in XYZ. These days, we have lots of projects that need to be completed on time. Employees are aware that if they leave at this time, management will do anything to retain them. Employees are resigning and blackmailing the management, stating that a decent salary hike is the only condition under which they will withdraw their resignation. This has become the norm of the day. Please advise on how to stop this practice.

Warm regards,
Saumya

[Name of the place edited to ensure privacy]

Understanding Supply and Demand in Employee Retention

In pure economics, the theory of supply and demand applies here. If the company has no pool of workers to recruit from, they have no choice but to give in or lose business. Please provide more information about the size of the firm, what pay is like compared to other similar organizations, how long the firm has been in business, etc. The more information you can provide, the more precise the advice you will receive.

Regards

Addressing Salary Discrepancies and Employee Retention

You have answered your question. If competitors are offering double the salary that you pay, would you not be tempted to leave? Any organization has to pay its workers in line with what others pay, or they will face attrition. Maybe introducing a loyalty bonus may stem the rot for a while.

Impact of Liberalization on Employee Rights in India

Generally speaking, after the liberalization in India, which coincided with the waning of the Labour and Trade Union movement, it has been the employees in general who were at the receiving end. Summary termination without even notice or notice pay, bifurcation of Minimum Wages, denial of Maternity Leave, denial of gratuity, etc., are just some of the excesses committed by small companies. Such cases are being documented from time to time in CiteHR for all to see.

People talk about "Laissez-Faire" or free-market economy as the reason for such a situation. It also means allowing the Law of Demand and Supply to act. Under these circumstances, employers have always had the upper hand as there were more people chasing fewer jobs.

Now, the situation seems to be reversed in the case of your company. Whatever the reasons, employees have got a chance to dictate terms. In my opinion, this is a good situation. It will force employers to treat employees a bit better than they have been doing so until now. Maybe some companies will start seriously thinking about Retention Strategies and Employee Motivation - which so far are encountered only in classrooms by MBA HR students.

Warm regards.

I believe you are discussing the workmen category. This is the time when most employees start looking for new opportunities. To retain them, we need to provide competitive pay and a better working environment. In today's competitive world, employees drive the organization, not the machines. I would advise preparing a legally validated employment contract with a two-month notice period. It's wise to always have backup plans to deal with emergency situations, such as arranging additional employees.

I believe this will be a learning instance for you. I would advise having a straightforward conversation with management about the issues and being ready with probable solutions. If you provide better pay, benefits, development plans, and a good working environment, employees will be happy to work with you. I hope this helps you find a solution to this situation.

Regards,

Hi Saumya, This happens in many places. To avoid such problems, consider taking on trainees at a low cost with a training period of six months to one year. This way, if an employee threatens to resign, the best trainee can take over. This strategy might make experienced employees think twice before demanding a pay hike. One important issue is that supervisors are not thoroughly familiar with the work and depend on their subordinates. This dependency is a main reason employees threaten to resign or ask for a pay hike. Management should maintain their composure and not give in to such demands. However, sincere and loyal employees should always be rewarded.

You have a good opportunity to restructure your salary grade with this challenge. Don't view this act of employees as "blackmail." These are just words from owners and stakeholders. You are in HR; think and react differently. Immediately conduct a SWOT analysis for your existing workforce in coordination with your management. Inform them that if they don't act, they will be at a disadvantage going forward, and as HR, you will need to put in extra efforts to maintain the workforce.

Job Evaluation

"Job evaluation" is the best way forward. It will help you compare jobs to assess their relative worth for establishing a rational pay structure. Don't rush to match competitors paying double salaries. Develop a long-term plan for the company. Focus on providing fringe benefits, implementing a good appraisal system, and creating a growth structure within the company.

For instance, consider implementing "3 performance bonuses" a year and other incentives. Wishing you good luck and urging you to see the challenge ahead as an opportunity to excel as an HR professional.

Regards,
Ukmitra