The decision by Mukesh Ambani’s Reliance Industries is in many ways the equivalent of a veritable economic stimulus that would help spark demand in the economy and potentially push other companies to follow suit.
Reliance Industries Limited (RIL) will roll back salary cuts for the employees of its various divisions with retrospective effect and hand over the performance bonus that was deferred after business was hit by the coronavirus lockdown.
The decision of India’s biggest industrial group to restore the salaries of its more than 3.5 lakh employees retrospectively from April 1, 2020, is the strongest signal yet of Indian industry’s recovery against the crushing blows of COVID-19 depths.
Restoring salary along with arrears would essentially put plenty of money to spend in the hands of the group’s employees and families. In many ways, this is the equivalent of a veritable economic stimulus that would help spark demand in the economy.
RIL is also offering an advance 30 percent of the variable pay from the next year's salary to employees as a goodwill gesture for working during the pandemic, the oil-to-retail conglomerate said in a communication to employees.
RIL said the payouts will be effected along with the October 2020 salary. “All these measures have been taken in order to support you in these challenging circumstances,” the company said in the communication.
RIL in April cut the salary of employees of its hydrocarbons division by 10 percent to 50 percent and the group's chairman Mukesh Ambani decided to forgo all his remuneration. The company also deferred annual cash bonus and performance-linked incentives that are normally paid in the first quarter.
While Mukesh Ambani decided to forgo his entire Rs 15 crore compensation, the Reliance board of directors, including executive directors, executive committee members, and senior leaders, relinquished 30 percent to 50 percent of their compensation.
In addition to optimistic signalling about the economy, the decision by RIL to restore salaries to previous levels as well as returning the difference, thus negating the wage reductions entirely, is a powerful demonstration of moral leadership—reflective of an organisation that cares. Through the pandemic period, RIL has been proactively addressing the health needs of its employees, sparing no expense in the treatment and well-being of its employees.
The decision by a company of the size of RIL, which has interests in a raft of sectors such as oil, retail, media and telecom, could act as powerful moral suasion on the rest of corporate India. Companies, large and small, could now follow the lead of RIL.
Employees of RIL with a compensation of less than Rs 15 lakh were spared a reduction in compensation in April. The salaries of the employees of Network 18, the company’s media division, too have been restored.
The entire COVID-management strategy and employee care were personally driven by the Ambani family, led by Mukesh Ambani and Nita Ambani. From large donations to the PM Cares Fund and several state government funds to several million free meals to the poor to setting up COVID hospitals for authorities for supplying masks and PPE kits to medical workers, the group has shown remarkable leadership in the country’s battle against the pandemic.
RIL's hydrocarbon business was adversely impacted due to a reduction in demand for refined products and petrochemicals after a nationwide lockdown was imposed to curb spread of coronavirus. However, the group was among the first to embark on a belt-tightening drive last year itself. It also announced deleveraging and eradicated its large debt pile 9 months ahead of schedule and that too in the middle of a pandemic.Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.