Is Variable Performance Pay Really Part of CTC if It's Not Being Paid? Seeking Guidance

Variable Performance Pay (VPP) in CTC

Our employees' CTC includes a fixed percentage or amount as Variable Performance Pay (VPP) apart from fixed Basic, HRA, Special Allowance, etc. The VPP was to be paid quarterly but has not been paid. Management says the VPP is not payable since there hasn't been much production.

Since the VPP is a part of the CTC, I would like guidance on whether the VPP is payable or not, considering it is part of the CTC. I request replies at the earliest.

Regards,
Dinan

Dear Dhinakaran,

Even though the variable pay is part of the CTC, it will be given only when a specific target is achieved. The employee is only eligible for the annual gross salary shown in the CTC, along with bonuses, medical reimbursement, and other benefits like mediclaim or LSP.

The variable pay terms and conditions would have been discussed with the employees at the time of joining. The VPP would be given only when the employee, department, or overall factory achieves the targets.

The CTC is only to show the cost involved in employing the employee for the year and is also used for various projections and budgets.

If performance-based bonus or variable performance pay is explained to the employee before joining and the employee agrees to it in writing, then there is no need to pay. The statutory bonus is mandatory and will not attract TDS, while PBB or VPP attracts TDS.

Measure for Calculating VPP or PBB

What is the measure for calculating the VPP or PBB? Does your company have any tools for it? Usually, this will be calculated based on the KPI points that an employee acquires through the KRAs given.

Regards,
Karthik

Variable Pay and CTC Clarification

Dear Mr. Shenbagarajan,

Thank you for the reply. However, I would like to add that no targets or Key Result Indicators (KRI), etc., have been spelled out, and no written documents are available for the Variable Performance Pay (VPP). Now the management informs us that it is not mandatory to pay VPP. Some employees have requested that since it is part of the CTC and no target has been fixed, the VPP may be paid, but the management says no.

Let me have your views on the above and how to go about the same.

Regards,
Dhinan

Dear Mr. Karthik,

Thank you for your views. Kindly see my reply to Mr. Shenabagarajan. Furthermore, when no targets or KRIs are fixed, measuring the achievement is not applicable. Please let me have your views.

Regards,
Dhinan

Hi Megh, We have a similar situation here. Our performance bonus is a variable component in CTC. Two measures are individual results against predefined quantitative and qualitative targets. I have performed, and my performance bonus figures are calculated and mutually signed by me and my immediate senior (a copy of that document is in my file available with HR).

However, the organization is not paying with the reason that even though I have performed exceptionally well individually, the organization as a whole has not performed well.

Do you have any suggestions for a resolution to this issue?

Regards,
Megh