Is It Fair to Include Variable Pay in an Employee's Annual CTC? Let's Discuss!

Can variable pay be a part of the CTC of an employee? As far as I think, variable pay is based on the employee's performance throughout the year, so how can that be decided in advance? Is it correct to include it in the Annual CTC of an employee?

Please share your views.

Regards,
Kamini

Hey Kamini,

Actually, if you want to motivate your employees, you can inform them in advance that they are entitled to variable pay and specify the amount, but this will be based on their performance.

For example:
CTC: 10000
Fixed pay: 7000
Variable pay: 3000

You can explain that their 3000 variable pay will be based on their performance; otherwise, they might receive less. Therefore, you can structure it accordingly for your organization.

Hi Sowmya,

In your reply, it is very clear that variable pay is included in the CTC. Correct me if I am wrong.

Regards,
Amith R.

Yes, it is included, but it always depends on the company policies. If they are willing, they can have it at the beginning; otherwise, at the end.

Kamini:

It varies from companies to companies; you can either add it and clearly mention it or pay them separately as a bonus component on their KRAs achieved.

Thanks,
Mirza
Hyderabad

Hi Kamini,

Yes, variable pay can be a part of CTC. In our company, we have a salary structure wherein we refer to it as special pay. Variable pay is contingent on the performance of an employee and may fluctuate accordingly. Therefore, both types of pay can be included in the CTC.

Thank you.

Dear Kamini,

In this current scenario, we are not getting the proper manpower with the required skills. The market is open now, and the employee turnover is also high. For the sake of retaining skilled and competent manpower, we are trying to keep the existing manpower for a longer time.

In connection with the above, many new HR techniques and policies are there, and this is one of the HR policies for retention. The same is communicated during interviews.