Surat diamond industry decides to offer performance bonus to check attrition-Jobs-News By Industry-News-The Economic Times

AHMEDABAD: For the first time in 50 years, the Rs 65,000-crore Surat diamond industry has decided to offer its workers a performance bonus in an attempt to check attrition and meet growing demand from the West. Companies are offering their skilled workers a portion of additional revenues earned through value-addition.

The incentive varies between 5% and 35%. Additionally, many companies are offering a continuity (loyalty) bonus of up to 15% of total salary.

“The performance-based incentive ensures productivity with quality. It fosters the growth of workers as well as that of companies,” says Chandrakant Sanghavi, chairman, Gem & Jewellery Export Promotion Council-Gujarat.

The Surat diamond industry cuts and processes 80% of the world’s rough stones from Belgium. It faced its worst crisis in 2008 as demand slowed in the wake of the recession, and some companies moved to processing big stones (solitaires). During the peak of the recession, four lakh workers were laid off in Gujarat, which has diamond-processing hubs at Ahmedabad, Bhavnagar and Amreli, apart from Surat. The industry employs close to 4.5 lakh workers in 4,500 units and, till last year, attrition was at 40%.

In the pre-recession period, the industry would pay salaries based on the number of diamonds cut and polished. However, quality is the new mantra, says Aagam Sanghvi, director, Sanghavi Exports. The industry’s top-end segment needs highly-skilled workers who constitute up to 20% of the workforce, according to Rohit Mehta, president of Surat Diamond Association.

With a revival in demand from western consumers, a section of the industry began its shift to solitaires. However, the units faced an acute shortage of manpower as retrenched workers were skeptical about coming back, forcing the units to announce incentives.

The focus on the high-value segment increased quality awareness and the need for skilled workers. With more units adopting the new system, skilled labour is receiving the right remuneration, encouraging people to enter the trade. The average monthly salary of a skilled worker is at Rs 25,000, but Mehta says, those who work on big stones and demonstrate high skill levels can earn as much as Rs 2 lakh.

Leading Surat-based diamond companies Hari-Krishna Exports and Sanghavi Exports adopted the performance-based incentive system, after the recession. Apart from the old practice of production-based salary, the companies started offering value-addition incentives as well. Hari-Krishna and Sanghavi employ 2,300 and 1,800 workers respectively.

In the value-addition-based model, workers receive up to 30% of their salary as incentive in his company, says Sanghvi. Hari-Krishna Exports opened its new unit for solitaires two years ago with just 25 workers. Later, the company introduced the performance -based incentive system in which workers earn 5-35% in incentives based on value-addition.

Currently, the company has 700 workers in this unit, says chairman Savjibhai Dholakiya. His brother Tulsi Dholakiya, a director with the company, says the move helped bring down attrition levels from 30% two years ago to just 5%. Skilled workers are queuing up for employment, and the waiting list has swelled to 200. However, attrition rates are still at a high 25%.

One of the oldest diamond units, Venus Jewels, adopted the performance-based incentive system in 1978. The company stood out during the recession as it did not lay off workers or shut its units for a single day. It employs around 1,500 workers. “In our company, a performer gets handsome returns,” says founder Sevantibhai Shah.

Many companies started offering a bonus to workers in May-June 2009 to retain them till Diwali, and have continued with the practice. When Surat-based Tiku Gems introduced the bonus scheme, in June 2009, it had nearly around 200 workers and a 40% attrition rate. Today, however, not only has production gone up, the company has 350 workers on its rolls and attrition is down to 15%, says Dinesh Navadia, managing director.