Understanding Employee Salary: How Much Should Be Tied to Company Profits?

Can you please suggest to me what percentage of an employee's salary is considered based on the net profit or gross income of the company? What should be the percentage of the total employees' salary in the company?

Thank you.

I agree with Shivendra; please do mention a little more about your query. Are you trying to map this for your company, or is it a project that you are working on as part of your MBA course? What kind of implementation are you looking for?

Regards,
(Cite Contribution)

It depends on the type of business of the company. There is no standard formula or rule. For example, software companies' salary components constitute more than engineering/manufacturing companies.

Regards,
R. Ponraj

Normally, it should be between 15% to 20% of the total revenue.

Regards,
Suresh M.G

Dear Ragesh,

There is no specific guideline regarding the percentage of salary to Sales/Turnover. In my opinion, the percentage depends on the nature of the industry, the market share enjoyed by the company (monopoly, competitive, or niche, etc.), the industry capacity, and the willingness of the top management to pay, etc.

The current trend in the industry is that employees are paid using two different pay structures - Fixed and Variable pay. While the fixed pay is the assured income for the employee, the variable pay is based on the performance of the individual and the company.

Regards, M.V. KANNAN

It totally depends on the industry type and also on the employer. There is no fixed criteria for that.