How to Set Effective KRAs and Incentives for a Purchase Executive in IT?

Creating a KRA with Incentive Basis for Purchase Executive

I am working in an IT company as an HR Executive. My boss is asking me to create a KRA with an incentive basis for a Purchase Executive, meaning his work should be based on incentives. We follow the policy of 50% fixed and 50% variable for the sales department.

Setting KRA with Target and Incentive for Purchase Executive

For the Purchase Executive, how should I set the KRA with target and incentive? For example, I selected a candidate for the Purchase Executive position with a salary package of Rs. 30,000 PM (which includes Rs. 15,000 fixed and Rs. 15,000 variable). On what grounds or parameters can I frame his variable part of Rs. 15,000?

Please share your input. My boss is continuously asking when I am implementing this in the system. Your response will be greatly appreciated.

Regards,
Dimple

Don't fix the variable at 50%. According to me, you should do the following:

1. Calculate the total CTC.
2. On the CTC, allocate 70% to fixed pay and 30% to variable pay.
3. Since you mentioned that the Purchase Executive's salary is 30,000, you may consider this within the Top Level Managers' range. Offer a variable pay of 25% to 35% on the gross salary.

or

Follow option number 2.

Thank you for your prompt response. Can you please suggest to me what parameters I can set for the variable at 30%? If he will be receiving a fixed salary of 70%, how should I structure his KRA for the remaining 30% on a variable basis? Please assist me with this.

Regards,
Dimple

Please help me out. Please suggest a fixed and variable salary formula for the Purchase Executive profile.

Hi, thanks for your input. My question is quite different; we can better understand it through an example:

Designation: Sales Manager

- Salary: ₹40,000 PM
- Target: ₹40,000 * 7 = ₹2,80,000 PM

Payout Structure

- **Slabs** | **% of Target** | **Incentives**
- 10% | 5.1-76% | ₹7,000 on completion of the upper limit of target
- 20% | 76.1-101% | ₹14,000 on completion of the upper limit of target
- 30% | 101.1%-above | Depends on the figure achieved

101.1% Achievement pay will be ₹40,000. Net Payout – ₹40,000 (fixed) + ₹40,000 (Variable) = ₹80,000 PM.

This calculation is for a sales guy in our company. Now my boss is looking for the same calculation for a "PURCHASE MANAGER." So, my question is on what basis I can set his/her KRA (Fixed & Variable).

Regards,
Dimple

Setting KRA for Non-Target Based Roles

On what basis can we set his KRA? His job is not target-based like a sales profile. We want to create a profile similar to a sales profile, where we can set his salary in the form of Fixed + Variable. But yes, for that, I need to set his KRA like a sales profile. The information I am looking for is what I can include in his KRA that can be target-based so that I can accordingly provide him with a salary in the form of Fixed + Variable.

Your prompt response would be highly appreciated.

Thanks,

Dimple