Understanding Variable Pay Options for Infrastructure Companies: Seeking Advice on Performance-Linked Plans and Common Practices

Hey experts, thanks for taking the time to read this.

Background:
I'm supporting an infrastructure company that is looking to decide upon a variable pay option for the level of AGMs and above.

Questions:
- What are the variable pay options (ideally those linked to performance) and which would you recommend for an infra company?
- What is the typical value of variable pay in terms of % of salary? (E.g., 35-40% for a specific level)
- What is the weightage typically given to individual, team, and organizational performances? (E.g., 50% to individual, 25% team, and 25% organizational)
- What is the difference between variable pay and incentives? I thought incentives were a part of variable pay, but I was told otherwise by the HRM.

Thanks in advance.

Have you conducted any studies on Variable Pay - Performance plans or referred to any relevant books? If not, let me suggest that you start understanding more about infrastructure companies, as an HR professional should be familiar with the company he works for, particularly in a growing sector like infrastructure.

Variable Pay Options for Infrastructure Companies

A strategic tool/component used to retain the best employees is providing Variable Pay. Many organizations use variable pay as a percentage of total compensation, which increases based on performance (typically 20-30%). In India, the variable component is usually 15 to 25 percent of the fixed salary. Recent studies have shown that high performers can be paid double their salaries, irrespective of their role in the company.

Typical Value of Variable Pay

Each company sets its variable pay based on business outcomes. For instance, lower-level employees may receive 10-12%, middle management 13-16%, and senior management 20-25%.

Business Today Attribution: Variable pay becomes the norm across sectors - Business Today - Business News

Weightage for Performance Metrics

Variable payouts have been adjusted on a large scale and are typically distributed individually. Companies aim to retain employees by providing benefits proportional to their performance.

Difference Between Variable Pay and Incentives

Variable pay and incentives can be confusing terms. Variable pay is given based on the individual's ability to motivate and retain employees, while incentives often depend on individual performance or contributions.

Regards,