Is It Fair to Pay Only on Performance? Seeking Advice on Adding Base Pay for Employee Security

My company is a commerce trading financial service-oriented firm. The query is, my company pays employees with a fixed salary for a few and based on performance for many. They don't have a base pay, so sometimes employees receive nothing if they fail to perform. I have recently joined and am considering changing this approach. I believe employees should receive a base pay with some variable components so that they receive a guaranteed amount every month. Am I right or wrong?

Implementing a Base Pay Structure

Secondly, how can I calculate or could you please guide me on how to implement this change? What is the minimum wage act in Tamil Nadu, and is it feasible to adopt it in our company?

I kindly request the experienced HR professionals and other knowledgeable colleagues to assist me in finding a suitable solution that benefits the employees. Thank you in advance.

Regards,
Suji

Understanding Performance-Based Pay

Performance-based pay, as I understand it, is essentially piece-rate wages. While piece-rate wages are permitted, there should be a base pay. Performance-based pay can be implemented, but it should be in addition to the minimum standard rate of wages. Therefore, first, you need to adjust the salary structure of all employees based on the Minimum Wages applicable to your industry. Then, you can consider how to set the pay, taking into account variables such as performance-based pay.

Transitioning to a Mixed Pay Structure

Transitioning from pure performance-based pay to a mix of base pay and variable components can benefit your commerce trading financial service firm. This change provides stability and incentives for performance. Calculate a fair base pay and tie variables to performance metrics. Check Tamil Nadu's minimum wage laws to ensure compliance. Communicate changes transparently to employees for a smooth transition.