How Should I Communicate Our New Pay Structure and Designation Changes to Employees?

Dear all,

We are introducing a new pay structure, grade, and designation in the organization wherein the CTC of the employees will remain the same; however, it will be split into fixed and variable parts. As per the new policy, based on the number of years of experience, he/she will get CTC as per the below:

Exp Fixed Variable (in yrs) % %

0-2 100 0

2-4 90 10

4-6 90 10 (there will be some difference in the job responsibility)

6-8 80 20

8-12 80 20 (there will be some difference in the job responsibility)

10-15 67 33

15+ 60 40

Please help me in understanding:
1. If I have to issue letters to them, what should I write in terms of their variable payout (which will depend on their performance and achievement of the target)?
2. What should be the actual format of the letter?
3. Should I give their job description in the same letter?

PS: The subject of the letter will be "Revision in Pay Structure and Designation."

Regards

Hi Ditti,

How are you? This is your friend Dino again. Personally, I suggest that you follow the Indian salary structure. This will help you adhere to Indian systems. If you are going to give a new designation to your employees, it is required to explain their responsibilities in the same letter.

Please see the attachment.

Hi Dino,

Thank you for your response. However, I still have a query. How do I define the variable payout in the letter or do you have any format that you can share?

Thanks again

Hi Ditti,

I am Jaya. I went through your query. I want to know in which sector you are working. If you are working in the manufacturing sector, you can have production incentives as one of the variable parts. Other things can include performance allowances, mobile allowances, grade allowances, etc.

Hope this information helps you.

Regards,
Jaya

Suppose an employee's CTC was 10,000/-. Now, as per your policy, if he has been in your company for 4 years, his fixed component will be Rs. 9000/- (90%), and the maximum of the variable component will be 1000/- (10%).

However, you are saying that the variable component will depend upon his/her performance. Isn't it?

Now, I personally feel that you can explain in the letters that the variable component will be paid as follows:

Appraisal Grade: Excellent -- Very Good -- Good -- Average -- Poor

Percentage of variable component: 100% -- 100% -- 80% -- 60% -- 40%

Now, an excellent or very good employee will retain his earlier CTC of 10,000/-.

But a good employee will get (9000 + 800) = 9800/-

An average employee will get (9000 + 600) = 9600/-

Hi Ditti,
You can mention below mentioned in the letter for PLI ( Performance linked Incentive)
· The performance linked incentive will be based on your performance during the year. This amount will be payable on achievement of -----% of your target and will be therefore be different for differing levels of performance. You will need to achieve a minimum of ----% of your targets to be eligible for this incentive.
Regards,
Harshad

Hi Ditti,

I am also working with an IT company, and we also have a variable based on the performance and achievement. The term that can be used for this is PBI, i.e., "Performance-Based Incentive," which can be given on a monthly or quarterly basis after evaluating the individual.

I think that you should not attach the job description with the letter; instead, you can separately provide Key Result Areas (KRAs) or job descriptions to individuals.

Regards,
Sakshi