Variable pay - a gimmick?

D

deepakraam

Deepak Narayanan
In recession time most of the companies are turning to the concept of variable pay.Variable pay means the amount in this salary basket is tightly coupled with lot of factors namely performance of the company,performance of the business unit and performance of the individual.Companies wanting to avoid lay-off are resorting to increase the percentage of variable pay in the salary structure.Almost 40% of the salary are termed as variable pay.This literally means that companu can't assure on this 40%.But I feel this is a gimmick.Instead the companies can annonce a pay-cut of 40% and remove this component of variable pay.In this recession times,Whatever can be the performance of an employee he/she can't be assured about this salary increase cos of the gloomy global eco scenario.So chances of getting a hike is bleak.So there is no concept of variable and everyone is mentally ready for salary cut even.So,what is the purpose of increasing the component of variable pay in the total salary.Instead the companies can straight away announce salary cuts which will atleast make the company transparent to its employees.Why should the company adopt this approach when everyone is aware of the global ecnonomic scenario.I feel the variable pay increase a gimmick in this current scenario.Instead a salary cut is more a st forward and transparent approach.

-Deepak.
 
I actually support the variable pay component. In this way people who perform are paid well while those who dont have to bear the brunt.

The purpose of a company is to make profit. Its a business and not an NGO, which means it will do all it can to maintain profitability at its max.

The variable pay linked with company performance, business unit performance and individual performance keeps everyone on its toes, gaurantees optimal pressure and work force productivity and helps the company survive.

Fixed pay brings in complacency among the workforce. Performance linked pay suggests best ROI for a company in such turbulent times.
 
Hi Kartik,
I agree with you that variable pay incites an employee to perform better.What is the purpose of this variable pay in this recession time when everyone from peon to CEO will not see any increment.Companies are increasing the percentage of variable pay.So variable pay which once excited the employees has become the weapon of attack for the same employees now.Employers are trying to increase the percentage of variable pay.So companies are now trying to adopt a "Carrot for a Donkey" approach.But everyone knows that in this lean times hike will not be a Buzzword.So the variable pay becomes invalid at this juncture.Instead of telling to the employees tht the company will not offer any hikes for them,which employees are ready to understand,companies are telling in a round-about way.Why is this needed?

-Deepak.
 
I wouldnt quite agree to that ideology.

Even in recession, there are companies that are performing .. and linking employee performance to variable pay is the best way to reward star employees.

The companies that are not performing during recession cannot afford hikes. So instead of slashing the pay across the board, the company pays to employees which help it survive.

Its all about ROI !
 
Hello Kartik,

I completely agree with you that Veriable pay is the best way to reward star employee. But in a situation like today, when companis are passing through a critical phase during recession, they are thinking for laying offs and reducton in salaries, these concepts looks like barely a show-off.
 
I feel the variable pay increase a gimmick in this current situation, instead the direct cut is better.
 
Yes, I do Agree to the above and also add that it is not the fullest compensation given for the hard work that people put in
 
variable pay is a good way to acknowledge the performance and talent...without it there would be no motivation to do skill full work
 
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