Dear seniors, I want to know about concept of variable pay in a manufacturing industry.
From India, undefined
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1From India, undefined
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Variable pay is a monetary benefit linked to the targets of each department. It can be based on the targets of an individual, department, or the whole organization. Key Performance Indicators (KPIs) for individuals, departments, or the organization should be defined at the beginning of the year, and actual performance should be monitored throughout the year against the targets. There can be a linkage for the variable pay based on the achievement of a certain percentage against the targets.
From India, Bangalore
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From India, Bangalore
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Dear Colleague,
Different companies use different terminologies like Variable Pay (VP), Performance Pay, etc. Basically, these payments, especially VP, operate on the logic that each year, talents are assigned certain key performance indicators for their role/department and the organization as a whole. Upon achieving 100% of the specified KPIs, a certain percentage of payment is shared with them from the profit. If the achievement level is at 90%, the payment will be less, and so forth. Variable pay is a driving factor to reach targets at 100%, which may include Financial KPIs, Cost KPIs, Market KPIs, Quality KPIs, all contributing to the profits of the organization. Generally, there is a correlation between the PBT of the company and Variable Pay. If the company does not reach a specific PBT level, no Variable pay will be given for that Financial Year. If the targeted PBT is achieved at 100%, a good variable pay percentage will be awarded. If the PBT exceeds 150% of the target, additional variable pay will be provided.
Variable pay in some companies constitutes a part of CTC at 15%-25% for Junior-level employees and up to 40% for Senior-level employees. This is also utilized as a retention tool. Some companies double the VP and distribute it over two financial years if the employee is still with the company at the time of VP disbursement. A good VP should focus on KPIs, PBT, and Retention simultaneously.
From India, Chennai
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Different companies use different terminologies like Variable Pay (VP), Performance Pay, etc. Basically, these payments, especially VP, operate on the logic that each year, talents are assigned certain key performance indicators for their role/department and the organization as a whole. Upon achieving 100% of the specified KPIs, a certain percentage of payment is shared with them from the profit. If the achievement level is at 90%, the payment will be less, and so forth. Variable pay is a driving factor to reach targets at 100%, which may include Financial KPIs, Cost KPIs, Market KPIs, Quality KPIs, all contributing to the profits of the organization. Generally, there is a correlation between the PBT of the company and Variable Pay. If the company does not reach a specific PBT level, no Variable pay will be given for that Financial Year. If the targeted PBT is achieved at 100%, a good variable pay percentage will be awarded. If the PBT exceeds 150% of the target, additional variable pay will be provided.
Variable pay in some companies constitutes a part of CTC at 15%-25% for Junior-level employees and up to 40% for Senior-level employees. This is also utilized as a retention tool. Some companies double the VP and distribute it over two financial years if the employee is still with the company at the time of VP disbursement. A good VP should focus on KPIs, PBT, and Retention simultaneously.
From India, Chennai
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Ravi Rakesh,
Variable pay. The word 'variable' is often used in Dearness Allowance. It varies with the consumer price index, more or less. Similarly, any variable pay varies with something, either performance, saving, quality, timeliness, customer satisfaction, speed, etc. It is a studied introduction. Possibly, all parameters are considered. It is a mutual agreement between employer and employee. The total wage is broken into two parts, one is fixed - most of the time linked to attendance - and the other is variable like incentive. That is to induce employees to work efficiently. It increases the profit and brand image of the employer. But again, this is a past concept. Now, what is more practiced is dependence on machines and motivation. Time and motion study is of yesteryear.
Vibhakar Ramtirthkar, Pune.
From India, Pune
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Variable pay. The word 'variable' is often used in Dearness Allowance. It varies with the consumer price index, more or less. Similarly, any variable pay varies with something, either performance, saving, quality, timeliness, customer satisfaction, speed, etc. It is a studied introduction. Possibly, all parameters are considered. It is a mutual agreement between employer and employee. The total wage is broken into two parts, one is fixed - most of the time linked to attendance - and the other is variable like incentive. That is to induce employees to work efficiently. It increases the profit and brand image of the employer. But again, this is a past concept. Now, what is more practiced is dependence on machines and motivation. Time and motion study is of yesteryear.
Vibhakar Ramtirthkar, Pune.
From India, Pune
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Dear Sir,
Variable pay means variable dearness allowance. For all registered individuals under the Factory Act, the Statistical Department fixes consumer index points. Per point is a certain amount of paise/rupee.
According to that, variable wages are fixed every month by the Statistical Department. The Chamber of Commerce can also provide assistance in this matter.
V. Subbarao
From India, Madras
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Variable pay means variable dearness allowance. For all registered individuals under the Factory Act, the Statistical Department fixes consumer index points. Per point is a certain amount of paise/rupee.
According to that, variable wages are fixed every month by the Statistical Department. The Chamber of Commerce can also provide assistance in this matter.
V. Subbarao
From India, Madras
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Variable pay is a part of an employee's CTC, which is taxable in nature. It may be calculated on a monthly/quarterly/half-yearly/annual basis as per the company's policy.
Variable pay is generally calculated based on mutually discussed and agreed-upon KRAs/KPIs. These can be organizational KRAs, individual KRAs, or a mixture of both company and individual KPIs.
Variable pay is entitled based on achievements of defined KRAs/KPIs. The company may define a baseline for each KPI below which an individual is not entitled to receive variable pay. The company may also have a policy to disburse the variable pay of more than 100% if the target achievement exceeds 100%.
From India, Noida
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Variable pay is generally calculated based on mutually discussed and agreed-upon KRAs/KPIs. These can be organizational KRAs, individual KRAs, or a mixture of both company and individual KPIs.
Variable pay is entitled based on achievements of defined KRAs/KPIs. The company may define a baseline for each KPI below which an individual is not entitled to receive variable pay. The company may also have a policy to disburse the variable pay of more than 100% if the target achievement exceeds 100%.
From India, Noida
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