For Senior Managers: What’s a Fair Percentage of Variable Pay in Total Compensation?

For managers and above (e.g., GM, DGM, VPs, etc.), what percentage of variable pay do you think is appropriate in relation to the total compensation package (CTC)?

I need to know which industry you are specifically associated with. However, the majority of companies provide variable pay in the range of 10-30% of their CTC, with a few exceptions for the Sales and Business Development teams. The frequency of payout is typically annual for most companies. However, for sales staff, the payout is often observed to be monthly or quarterly, depending on the organization's compensation policy.

In a growing economy, the roles of Senior and Top management are pivotal in the growth of organizations. This importance is reflected in the Variable Pay structure of their compensation. The spread in the variable pay range is highest at the middle and senior management levels. Across industries, the average variable pay should fall between 15% and 20%.

In addition to the logic given by Rohit, the percentage of variable pay depends upon the company's philosophy, especially regarding incentives. If a company wants employees' motivation to achieve certain targets, goals, or expectations, a considerable portion of their CTC needs to be variable. Additionally, it needs to be weighed against market trends, the level of the employee, and the psychological comfort or surety expected from employees for a committed CTC.

Hence, as mentioned by the expert above, there is no "One Size Fits All" solution or "Manual" available for Variable Pay. Once implemented, you also need to review it regularly to arrive at the most effective variable pay policy for your organization, as the post-implementation scenario would provide you with feedback.

Regards,
Shailesh Parikh
Vadodara, Gujarat
[Phone Number Removed For Privacy Reasons]

In addition to the above responses, the variable portion of remuneration can also depend on which stage of growth the organization is in. For an organization growing rapidly in the initial stage, the variable pay can be higher. The same goes for when the company is in expansion mode or aiming to achieve specific objectives. Even the variable pay for higher management can be linked to the achievement of those specific objectives.

In a company that is stabilized, and the higher management is focused on strengthening internal processes and fostering growth with stability, the percentage of variable pay may decrease. The question of 'how much' is subjective and can only be answered concerning factors such as involvement, control, responsibility, and others.

Regards

It cannot be defined with a specific number for percentages and depends on the company size, its turnover, and other factors, I think.