Hi Amit,
Many organisations have 2 components in their pay (CTC). In our organisation it is as follows:
- Fixed pay
- Variable performance linked pay
The fixed pay is called Annual Guaranteed Cash (AGC) which is what you get irrespective of your performance(!)
The variable component (which is 20% of CTC now for us) is entirely dependent on your performance which is measured by KRA - Key Result areas.
Advantage: Better performer gets paid (normally)
Disdvantage: Sometimes the KRA's tend to turn subjective and then what you get depends on other extraneous factors and not performance. This is typically true for staff functions where performance cannot be measured in terms of "numbers" which is the case in functions like sales, buyer (purchase) etc.
Many companies have already moved towards 'balanced score card' already.
Bala