Companies increasing variable pay to retain, attract talents: Experts

“We see an increase ranging from 10-25 per cent during the last 2-3 years. Today for some companies, the variable component is nearly 25 per cent of the fixed salary for employees at junior-mid level,” TeamLease Services Head of North Business Mayur Saraswat told PTI here. 

This growth in variable component reflects 10-20 per cent on the gross salary, he added. 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. Echoing a similar view, Michael Page India MD Nicolas Dumoulin said domestic companies are now increasingly including the variable pay component in employee’s salary packages.

“Therefore, the size of the variable pay is larger when it comes to local companies, with an approximate of 20-30 per cent bonuses being offered,” he added. He said, 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, Dumoulin said, 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. Whereas, for results-driven and executive roles, this benefit is a constructive retention tool as employees recognise that their variable pay component can be influenced by their performance, he added.

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, he pointed out. 

Meanwhile, GlobalHunt Managing Director Sunil Goel said, variable pay comes as a supplement and opportunity to benefit the resources when company does well and wins lot of projects or business opportunities where employees becomes as direct or indirect stakeholders for good times.

“We have seen in most of the new-age businesses like startup’s, technology, BFSI, retail, e-Commerce, chemical, even in FMCG sectors are following this trend but at the same time industries like real-estate and telecom, which is going through consolidation, phase have been able to keep their fix cost as low with not so high variable payout as per the business performance,” he added.

Since the fixed component is not increasing more than 10-11 per cent, Goel said the variable pay-outs are reflecting or elevating the gross salary up to 30-40 per cent higher.