How Can We Revamp Our Compensation Plan to Motivate All Employees Effectively?

Dear All, I hope everyone is well! My director has tasked me with creating a performance-oriented compensation structure for all employees, spanning from upper to middle and junior levels.

Current Compensation Structure

Currently, our structure is as follows:

BASIC: 48261.6
HRA: 32174.4
GROSS: 80436
EPF: 1800
ESI: -
NET PAY: 78636
EPF: 1800
ESIC: -
LOYALTY BONUS: 104848 (Fixed & payable annually)
PROJECT PERFORMANCE: 144784.8 (Variable, ranging from 0% to 400% of Basic)
PERFORMANCE BONUS: 193046.4 (Variable, ranging from 0% to 300% of Basic)

Total CTC: 1386311

This is common to all levels of employees. We now wish to revise this structure because currently, only 10 out of 50 employees are eligible for the project or performance bonus.

Objective of the Revision

Our goal is to increase the accountability of managers for their work and to provide mid and junior level employees with incentives to work smarter. In essence, if they work smarter, the company is willing to pay.

I kindly request your assistance in this matter. Looking forward to your valuable input.

Thanks in advance.

To develop a comprehensive performance-based compensation plan for employees across all levels, it is essential to align the structure with the company's objectives. Here are some practical steps to achieve this:

1. Assessment of Current Structure:
- Evaluate the existing compensation structure to identify its strengths and weaknesses.
- Analyze the effectiveness of the current bonuses and incentives in driving performance.

2. Define Performance Metrics:
- Clearly outline key performance indicators (KPIs) for each level of employees.
- Ensure that the metrics are specific, measurable, achievable, relevant, and time-bound (SMART).

3. Tailored Compensation Packages:
- Design compensation packages that are tailored to the performance levels of upper, middle, and junior employees.
- Consider a mix of fixed and variable components to reward different levels of performance.

4. Inclusive Bonus Structure:
- Revise the bonus structure to make it inclusive across all levels of employees.
- Introduce performance-based bonuses that are achievable by employees at every level.

5. Communication and Training:
- Communicate the revised compensation plan clearly to all employees.
- Provide training to managers on how to assess and reward performance effectively.

6. Regular Review and Feedback:
- Establish a system for regular performance reviews and feedback sessions.
- Use feedback to continuously improve the compensation structure and make necessary adjustments.

By implementing these steps, you can create a performance-based compensation plan that motivates employees at all levels to work smarter and align their efforts with the company's goals.

Here I am seeking for a compensation structure/ break up by inculcating Fixed & Variable components.