How Should We Handle a Dispute Over Variable Pay Amid Financial Struggles?

Dear Members,

Performance-based incentives are part of the salary structure in my organization. One of our employees, who has been with us since the inception of the organization, was initially given an appointment letter where the variable pay was calculated at 10% of the basic salary. Due to the initial stage of the organization, there were many changes made to the salary structure to make it more competitive. Subsequently, the variable pay was revised to 10% of the Cost to Company (CTC).

Though the above change was communicated to the employee, he is now referring back to the appointment letter and requesting the difference to be paid to him. Additionally, my organization is not performing well financially, making it challenging to part with this resource. Given this situation, would it be advisable to pay the difference and consider reducing his variable pay in line with the terms of the original appointment letter going forward?

I am seeking suggestions on how to handle this matter.

Thank you.

Regards,

Nikita

Hi Nikita,

Even we faced the same issue in our organization. But before he could proceed further, we provided him with a copy of the 'Revised Terms of Employment' for the employee, where all the terms and conditions of his employment are set according to the present and future expected performance of our company. Our employee did not cause much trouble since he has been with the firm from the beginning. We sat down with him and explained the current situation of the company. He clearly understood us and signed the 'Revised Terms of Employment' without any issue.

I'm unsure if this information will be helpful to you. If it does help, I will be glad.

Regards,
Vasanth

Dear Vasanth,

Thank you for your input. What was overlooked on our part was documenting or revising the terms and conditions and providing him with a copy. Instead, we only handed him a revised Salary Structure document.

Best regards,
Nikita

Hi Nikita,

We also encountered a similar situation in our organization. Before proceeding further, we provided the employee with a copy of the 'Revised term of Employment', outlining all the terms and conditions of his employment based on the current and anticipated future performance of our company.

Fortunately, our employee did not pose much of an issue. Since the employee has been with the company from the beginning, we sat down with him, explained the current company situation, and he clearly comprehended and signed the 'Revised term of Employment' without any hassle.

I am unsure if this information will be of assistance to you. If it proves helpful, I will be pleased.

Warm regards,
Vasanth