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Performance Linked Variable Component
Human Resources » Performance Management

Chrm Message From: prakash_chintamani Total Posts: 18 Join Date: 10/05/2007
Rank: Executive Post Date: 20/06/2007 22:02:27 Points: 90 Location: United States

Dear Seniors,

We are a medium sized Engineering/ Manufacturing co. Last year we had introduced the system of Perf. Linked Variable Bonus for our officers in Engineering segment of business.

We have given increments in two components:
Fixed increase on existing CTC.
Annual Perf. Linked bonus (Calculated as certain %age of avg. in a grade).

The ratio of two components (Fixed : Variable :: 60 %:40%)

The resultant Compensation structure is now guaranteed pay to Variable: 95%: 5%. This year we want to make it 92 %: 8%

But we are facing certain issues in the second year, which are outlined below and we want to clarify as to what are industry practices (in your company pl.)

Whether the Variable Perf. Bonus (Linked to performance) given in a particular year is included in CTC for the purpose of:

Deciding salary of new recruit within the range of the company levels in a particular grade.

If it is included then whether variable bonus forms part of comp. Package of new recruit. If yes how it is given and how much.(Corresponding to what perf. Level.)

Giving increments next year?
e.g. if the ratio of guaranteed pay to variable pay is 95 : 5 % . Then the increments next year would mean:

Perf. Linked increase (covers incidence of inflation also) on existing CTC : i.e. increase on 95 % or 100%.(Pl. clarify)

Calculation of performance linked Variable Bonus levels (Last year we calculated it as % age of avgs in a grade). Now would it mean calculating bonus amounts (as %age of avg.) at different perf. Levels on 95% or 100%(i.e. including last year’s bonus amount as well).

3. Current Ratio of two increment components. Because of first time introduction in our case it was high: 60 % : 40 %.

A prompt reply would be highly appreciated.

Thanks in Advance

Prakash C

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