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.
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! 3rd August 2016 From India, Patiala