Hi seniors,
One of my friend company Planning to revise their slary structure by taking off 10% variable component and this 10% variable component they want to add up in whole CTC.
Below is the case I mentioned. Please add your comments and suggestion.
Team,
We were revising our salary structure, till date our salary structure was 90% fixed and 10% variable ( Bonus Component). Now we have decided to club this to 100% CTC, meaning no variable component.
I am looking for suggestions from Seniors, on how to regularize this clubbing of 10% variable component as part of CTC. Our appraisal as per date of joining and we cannot wait for one more year to clear this one by one. We would like to do it at one shot.
Please share your thoughts on the same, including your thoughts on how much % component should go to CTC.
If we do this excercise, what will be -tive side of it and +tive side of the same.[ Employer and Employee Perspective]
Looking forward for good analysis of this case.
From India, Hyderabad
29One of my friend company Planning to revise their slary structure by taking off 10% variable component and this 10% variable component they want to add up in whole CTC.
Below is the case I mentioned. Please add your comments and suggestion.
Team,
We were revising our salary structure, till date our salary structure was 90% fixed and 10% variable ( Bonus Component). Now we have decided to club this to 100% CTC, meaning no variable component.
I am looking for suggestions from Seniors, on how to regularize this clubbing of 10% variable component as part of CTC. Our appraisal as per date of joining and we cannot wait for one more year to clear this one by one. We would like to do it at one shot.
Please share your thoughts on the same, including your thoughts on how much % component should go to CTC.
If we do this excercise, what will be -tive side of it and +tive side of the same.[ Employer and Employee Perspective]
Looking forward for good analysis of this case.
From India, Hyderabad
There is no hard and fast rule toregulate such element of compensation while merging into fixed salary component. You did not mentioned your fixed elements of compensation for example Basic, HRA,CCA, TA, Medical Allowance, Education Allowance, etc..
Variable component is performance bonus which is effective from the date of joining. You may use one effective date of 1st April as new accounting year or with restorspective effect from the 1st January 09 as per you convenience taking into consideration the mid term performance review of employees to effect the change.
Merging of one variable salary component into fixed salary is not at all difficult exercise because that will not reduce the salary. Only you have to see whether your statutory deduction on PF,ESIC and IT shall not add burdon to salary bill. Further you must ensure to protect existing salary and enhance by adding variable component to fix salary.
The only issue will be Income Tax Exemption under certain account head to be checked to eleminate from the purview of taxable income.
You may also have an opportunity to restructure entire salary structure to apply some robust rationale and place them into grades and pay bands plus some % of allowance distribution depending on tax exemptions.
Badlu.
From Saudi Arabia
Variable component is performance bonus which is effective from the date of joining. You may use one effective date of 1st April as new accounting year or with restorspective effect from the 1st January 09 as per you convenience taking into consideration the mid term performance review of employees to effect the change.
Merging of one variable salary component into fixed salary is not at all difficult exercise because that will not reduce the salary. Only you have to see whether your statutory deduction on PF,ESIC and IT shall not add burdon to salary bill. Further you must ensure to protect existing salary and enhance by adding variable component to fix salary.
The only issue will be Income Tax Exemption under certain account head to be checked to eleminate from the purview of taxable income.
You may also have an opportunity to restructure entire salary structure to apply some robust rationale and place them into grades and pay bands plus some % of allowance distribution depending on tax exemptions.
Badlu.
From Saudi Arabia
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