Hello Experts,
I am HR Asst. Manager working for corporate of 150 employees and our management would like to relook and the incentive structure. As a current practice, we have defined Incentive Percentage viz. 12.5%, 17.5% and 30% on gross salary based on their performance. We also have performance calculator based on their KPA’s and also designed performance % slabs to pay Incentive percentage.
However, now management would like to link performance incentives to revenue target which is generated for the fiscal year.
For example if “X” would be the revenue achieved than “Y” would be the total incentive payout for all the employees.
Hence I would like to know, how we can calculate the total incentive payout among all the employees and also based on their individual performance and revenue achieved.
Would need your expert advice.
From India, Mumbai
I am HR Asst. Manager working for corporate of 150 employees and our management would like to relook and the incentive structure. As a current practice, we have defined Incentive Percentage viz. 12.5%, 17.5% and 30% on gross salary based on their performance. We also have performance calculator based on their KPA’s and also designed performance % slabs to pay Incentive percentage.
However, now management would like to link performance incentives to revenue target which is generated for the fiscal year.
For example if “X” would be the revenue achieved than “Y” would be the total incentive payout for all the employees.
Hence I would like to know, how we can calculate the total incentive payout among all the employees and also based on their individual performance and revenue achieved.
Would need your expert advice.
From India, Mumbai
Dear Rahul,
I recommend you keeping the existing procedure of linking salary increment to the performance as it is.
Now about attainment of revenue targets. The extra revenue generated could be in the form of additional payout rather than making it substitute for the individual's KRAs.
You can disburse the % additional revenue generated. What that % is can well be decided by your management. Let me give you example:
If the revenue target is say Rs 100 Crore. If the target is attained or exceeded then ___ % to be disbursed amongst all the 150 staff employees.
My personal view: - The policy of revenue sharing is detrimental. It will set a wrong precedent. Company none less than Infosys has huge stockpile of cash of Rs 22,500 Crore. Does it mean that they disbursed the amongst the employees? Rather they restricted the salary increase to just 6-8%
The one more argument is about profit. Revenue figures are deceptive. What if higher revenue is generated but profit per cent is low?
Companies make profit or loss. Management should be equanimous to both. Employees should be paid regular salary increment or performance linked bonus and nothing else.
About my consulting services on PMS: - I provide consulting services to institute Performance Management System (PMS) in the company. I design very comprehensive measures. To know more about instituting PMS in the company, you click here to refer my past post.
There is lot of misconception on the concept of KPI and KRA. To remove this misconception, I have uploaded my presentation on Youtube. To refer that video, you may click here.
I handle consulting on PMS. To know more about my services, you may click here.
Thanks,
Dinesh V Divekar
[B]
From India, Bangalore
7855I recommend you keeping the existing procedure of linking salary increment to the performance as it is.
Now about attainment of revenue targets. The extra revenue generated could be in the form of additional payout rather than making it substitute for the individual's KRAs.
You can disburse the % additional revenue generated. What that % is can well be decided by your management. Let me give you example:
If the revenue target is say Rs 100 Crore. If the target is attained or exceeded then ___ % to be disbursed amongst all the 150 staff employees.
My personal view: - The policy of revenue sharing is detrimental. It will set a wrong precedent. Company none less than Infosys has huge stockpile of cash of Rs 22,500 Crore. Does it mean that they disbursed the amongst the employees? Rather they restricted the salary increase to just 6-8%
The one more argument is about profit. Revenue figures are deceptive. What if higher revenue is generated but profit per cent is low?
Companies make profit or loss. Management should be equanimous to both. Employees should be paid regular salary increment or performance linked bonus and nothing else.
About my consulting services on PMS: - I provide consulting services to institute Performance Management System (PMS) in the company. I design very comprehensive measures. To know more about instituting PMS in the company, you click here to refer my past post.
There is lot of misconception on the concept of KPI and KRA. To remove this misconception, I have uploaded my presentation on Youtube. To refer that video, you may click here.
I handle consulting on PMS. To know more about my services, you may click here.
Thanks,
Dinesh V Divekar
[B]
From India, Bangalore
Hello Dinesh,
Thanks for your valuable response and expert advice.
I will definitely put this advice across the management and will try to get their views on it.
In case they would still like to go for the said arrangement, so can you help me in understanding such implementation of performance management.
From India, Mumbai
Thanks for your valuable response and expert advice.
I will definitely put this advice across the management and will try to get their views on it.
In case they would still like to go for the said arrangement, so can you help me in understanding such implementation of performance management.
From India, Mumbai
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Performance.Bas ed.Management.p df
Performance based break up.xls
12 Vangonotes HRM - Pay for Performance and Financial Incentives.zip