An Article about How to implement Variable Pay Across the Organization...

1. Variable Pay? - By Prof. Nagendra Saraf

2. “Appraisal”
Fun or
Drudgery?
Many of the HR Managers will have to go through this
crucial phase of Annual Monitory Appraisal.
While they do so, they too under go tremendous
stress, basically to keep everyone Balanced and
Happy…
Is Appraisal Fun or Misery? This can only be
understood by the HRM who will know the Financial
Status of the Company…
Nevertheless, one has to do this and appraisal has to
come; whether you like it or not…
While Technology Company Employees enjoy a
booster raise, people from the other Industries will
not get that kind of a hike.

3. The Value of
Hike…
Will Hike give Happiness?
While this actually happens, the retention of
this happiness can be short lived…
That’s because after a couple of months, this
hike now becomes the default salary…
So, how do you ensure that employees are
constantly motivated?
Is this ever possible??
The answer is…

4. Variable Pay…
• We first need to understand what is a variable pay…
• Let’s take this scenario…
• An employee is drawing a Gross of 10k per month as salary {CTC}
• This is his current salary before the appraisal…
• Based on his appraisal, we can Fix a Hike of 3% ~ 8% max on this
Salary. Let’s say, in this case we take it as 5%...
• So, now the hike is Rs. 500/-

5. Fixed Pay…
Let’s call this New Salary of Rs. 10,500/- as
the Fixed Pay for this Year…
Now, we will link the Basic KRAs to the
employee’s Role.
Assume there are 5 Tasks that the KRAs
demand.
Now, it means, if this employee shall perform
these 5 tasks without fail, as per the
schedule, he will be entitled for Fixed Pay…

6. Willingness
• But, there are other 4 tasks which are slightly/ more demanding and hence
there’s an unwillingness in the employee…
• Remember::
• “An unwilling employee” is the most difficult to train/get the work done
from… Because, if he’s ‘Able’; his unwillingness will not allow him to perform
additional Responsibilities as his mind generates thousands of questions
‘Why should he do it?’.
• So, here’s where the Variable Pay comes into the picture…

7. Defining
Variable Pay…
Variable Pay is that Hike which is
an Extra Income that an Employee
gets when he does 6,7,8 & 9 Tasks
and Produce Results and Reports
to the Management.
We can now arrive at variable pay
as 7% ~ 35% max. of the New Fixed
Pay… Which means, for 10.5k we
can look at declaring an additional
Pay of 10% {Rs. 1050/-} linked to
the additional KRAs to be
delivered.
So, if he delivers just 6 & 7 tasks; he will be given additional 525/- as this month’s
variable pay…

8. So What?
• The attitude of people towards money is that they’ll do whatever it takes to get
that, that too when it comes as an extra!
• So, getting this Variable Pay becomes ‘I should’… When linked with the KRAs,
they will produce the desired result without us having to make them ‘willing’…
• We can define all that we need from the Profile thereby we need not do any
policing act. People will Report ‘automatically’…
• How to Define, then?

9. Arrive at Slabs
Salary Slab
• < 10k
• 10 ~ 15k
• 15 ~ 25k
• 25 ~ 40k
• 40 ~ 60k
• 60 ~ 100k
Fixed Hike
• 10 ~ 15%
• 9 ~ 12%
• 8 ~ 11%
• 5 ~ 9%
• 4 ~ 6%
• 3 ~ 5%
Variable Hike
• 15 ~ 20%
• 12 ~ 17%
• 10 ~ 14%
• 8 ~ 12%
• 6 ~ 10%
• 5 ~ 7%

10. Declare
Additional
Benefits
{Based on Slab}
For people who have worked more than
5+ yrs ::
• Health Insurance Benefits for individual
For people who have worked more than
7+ yrs ::
• Health Insurance Benefits for individual + spouse
• Sponsoring Education for One Child
For people who have worked more than
10+ yrs ::
• Health Insurance Benefits for entire family of 3/4
people
• Sponsoring Education for Two Children

11. For Sales Executives
• Achieve Double the Target and Take Double Salary incl. 3 x Variable Pay…
• Achieve Double the Target in a Quarter and Win a Bike worth 1 Lakh!
• Achieve Double the Annual Target and Win a Car!!
• Achieve Triple the Annual Target and win a furnished 2 BHK Home!!
• Note: Incentive is something which is given for the effort that an executive puts for closing the sales and
completing the collection…

12. For
Production
Team
One
Complete Delivery
as per schedule ::
• Take One Week Salary
as Bonus
Two
Complete
Production with
Zero Errors ::
• Take Half-month Salary
Bonus
Three
Save while you
Produce :: {Cost
Control}
• 5% when you save 30%
• 10% when you save
50%

13. FOR IT Team
For Programmers and Developers:
• Error Free Code
• Testing Reports to be included before Code
Submission
• Code Commenting
• Logic Explaination
We can look at the following factors:

14. Will it Work?
Yes! It will and best at Frontline
and Middle Mgmt.!!
This will eliminate ‘unwillingness’
and need to check for optimum
performance…
This will boost communication
across departments
Everyone will be in competitive
spirits…
Given Training, it’ll be a winner all
the way!!

15. Disclaimer:
All these are factors which can be combined or
implemented separately.
While I’ve tried this model in the Manufacturing
Industry and Hospitality Industry, the results are
astounding!
For the implementation of in these above industries,
Data Sampling were done i.e., we took this up with few
people who were willing to participate in this exercise…
Please discuss this with your HR and arrive at an
implementation sequence…
Feel free to discuss this with me too, if you need any
assistance…

16. Any Questions?
•-- Thank You –
• Reach me ::
• nagendra@wemanage.in