Normally variable pay is shown in the salary break up sheet subjected to certain conditions, like achieving targets, performance, profitability etc. Variable Pay inclusive of bonus as per Payment of Bonus Act is a general condition which is binding on all employees whether relevant to Payment of Bonus Act or not. From the very term itself it is clear that Variable Pay is something which is not fixed but is depending upon certain other factors. It is implied that performance and profitability will be the primary factors which will decide the quantum of this benefit. If the company makes profit, the employees get bonus at a rate higher than the statutory rate of 8.33%. Another condition attached to it is that, if you are qualified to be eligible to bonus, then you will get it, otherwise not. Then another condition shall be that if your individual performance is good, then you will get it.
Now, coming to measure of performance, you cannot have a regular scale with which you can quantify the performance of each individual unless you have some standards set for each person in the beginning of the year itself. Without such measure, it becomes a routine analysis which will consider among other things, whether this person will continue to contribute to the goals of the organisation in future also or will he leave us? If it is expected that he will leave and will not be available for taking the company to higher profits next year, naturally, his performance will be rated very low which will deprive of the variable pay. Of course, for those who are eligible for Bonus as per the Payment of Bonus Act, that part of variable pay is assured but for others, there is no guarantee as to whether it will be paid or not. It is true that if you were given a target for the period linking it to variable pay, you will get it subject to one and only condition that you have achieved the target even if you are on notice pay at the time the amount is disbursed. On the other hand, if it is subject to any qualitative judgements, you can forget about it.
Since the salary is not fully based on performance but only a part of it is variable, and that even without that variable pay your salary (ie, fixed part only) will be above the Minimum Wages fixed by the government, you cannot get any protection from the labour authorities or machinery for redressal of such grievances. On the other hand, if you were offered a salary of which major part is variable and the fixed component is less than the minimum wages, then the situation will be different. Therefore, the policy of the company with regard to Variable Pay will say whether it is available to you or not. You cannot say that you were not aware of this and you were with an impression that the variable pay is readily available to you even if you do not perform or even if you drop the job and leave the company in between.
Madhu.T.K