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Hi All,

My organization is planning to add a Monthly Variable Component (MVC) in CTC for Sales employees. This will be payable as per the Performance of each employee w.r.t to target given & % target achieved for that month. This is different from incentives, as incentives are paid over & above the CTC depening on monthly schemes. We have been given task to design a salary structure accordingly. Since i couldn't find any precedent for MVC, below is what one of my colleagues is proposing

E.g The monthly NTH of employee is Rs 16000.

Fixed Components

1. Basic - Rs 8500
2. HRA( 5%) - Rs 425
3. Bonus (8.33%) - Rs 708

4. Gross - Rs 9633

Deductions -(Employee Contributions):

5. PF (12%) - 1020
6. PT - 200
7. ESIC - 169

8. Payable after Deductions ( Gross- Deductions) - Rs 8244
9. Monthly Variable Component - Rs 7756

10. Net Take Home (Payable+MVC) - Rs 16000

But there are certain doubts that we can't find answers to, so hoping the members here can help answer them:

Q1. Can variable pay be given monthly? (couldn't find any govt. notifications or circulars related to Variable pay) Most organizations pay it Quarterly or half yearly.

Q2. If Variable pay is given monthly, will it attract any statutory deductions like PF/ESIC? (In structure above, we assumed it will not attract any statutory deduction)

Q3. What is the maximum limit of Monthly Variable Pay as a % of monthly CTC/Basic salary?? (we assumed no limit in above structure)

Q4. What documentation is required to be kept by organization to justify the monthly variable pay given to employees, for Audit Purposes?


Please help throw some light on these questions. Thanks!

Hi Navjot,
Is your present employer tuning up the compensation structure without adding an extra figure to the base salary which you were entitled to? Is your employer asking every individual to come up with a structure? Don't you have a HR & Finance department in your company? Also given below are the answers to the concern raised.
1. Yes, variable pay can be paid monthly
2. PF and ESI are calculated on your Basic and Base Salary
3. There is no maximum limit for variable pay. However in general terms organizations, take up anywhere between 20% to 30% of your CTC. There are companies who consider 50% as well.
4. Need clarity on the question.

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