Salary Structure Dilemma: How Do You Allocate Fixed and Variable Components?

Hi,

I need help designing our salary structure. Could you kindly assist me in allocating the fixed and variable (quarterly and annually) components of the annual CTC?

Regards,
Pranati

Hi,

You can structure your salary as 80-20, i.e., 80% of the gross will be fixed and 20% will be variable. For marketing employees, you can structure it as 60-40, with 60% fixed and 40% variable. For the variable component, you can set targets.

Regarding payment, you can pay the variable amount on a quarterly basis based on the achievement of their targets. You can structure your salary according to the financial year or the date of joining.

Thanks,
Uttama

Dear Uttama,

Thank you very much for your reply. Currently, our variable structure is 70-30 and 80-20. The variable is divided into quarterly and annual components. The problem we face is that many times it is difficult to explain to the candidates the structure as they feel it should be in addition to their annual CTC.

Regards,
Pranati

Hi Pranati,

You are most welcome. Today, most organizations have a salary structure of fixed and variable. However, if you find a candidate who is new to this structure, explain it to him in advance. This is important because if he progresses through the other rounds and is selected, you may encounter a problem. The candidate might claim that he was not aware of the structure and hence is not interested in the offer. Therefore, make sure to explain to him that your organization follows a salary structure consisting of fixed and variable components. The fixed part is paid monthly, while the variable part is paid quarterly or annually based on performance. Be very specific that the variable portion will be performance-based; otherwise, he might assume that the variable amount will be paid in full by default at the end of each quarter.

I hope this explanation helps you.

Thanks, Uttama