The growth in variable component reflects 10-20 percent on the gross salary. Companies in different are increasing variable pay component as a proportion of employee salary to incentivise performance.
Companies are offering 10-25 percent increase in variable pay as incentive to retain and attract talents, especially in the IT, FMCG, e-commerce, BFSI and telecom sectors.
TeamLease Services Head of North Business Mayur Saraswat told here, “We see an increase ranging from 10-25 percent during the last 2-3 years. Today for some companies, the variable component is nearly 25 percent of the fixed salary for employees at junior-mid level.”
He added that this growth in variable component reflects 10-20 percent on the gross salary. Companies in sectors like IT, Information Technology Enabled Services (ITeS), FMCG, e-commerce, Banking, Financial Services and Insurance (BFSI) and Telecom are increasing variable pay component as a proportion of employee salary to incentivise performance.
“Historically, companies were used to the concept of having fixed pay. But now, with markets getting matured and complex with competition, companies believe talent is one of the key factor for success. To attract and retain talent, one would need to have a culture of high performance as well as incentivising performance,” Saraswat said.
Reflecting on the same, Michael Page India MD Nicolas Dumoulin said domestic companies are now increasingly including the variable pay component in employee’s salary packages.
He said, “Therefore, the size of the variable pay is larger when it comes to local companies, with an approximate of 20-30 percent bonuses being offered. MNCs have always offered this element to their employees across the globe, therefore, they continue to offer this but the extent of compensations have not drastically increased.
Dumoulin said, well-established companies in FMCG and banking, healthcare and life sciences, chemicals, building materials and sales driven roles have started introducing this aspect.
However, the variable pay component is not the most effective method to retain or attract talent as it is a one-off amount that employees get, especially for those in a support function role.
Dumoulin concluded that apart from the variable pay component, professionals are eager to work with organisations that allow them to take on different roles in the corporation, offer international working opportunities and have flexible working hours,.