IS "VARIABLE PAY" SOME KIND OF A TRICK?

IS "VARIABLE PAY" SOME KIND OF A TRICK?


There are a plethora of reasons why an IT Professional would join a Company & then would stay there - Work Culture, Job Responsibilities or Learning opportunities. But the foremost reason, of course, remains the Compensation that a Company is offering. In the IT Industry, Compensation is usually divided up into Fixed Pay and Variable Pay.
So, what is this Variable Pay all about?
Is it something to be concerned about?
And what are the different aspects of this Variable Pay?
Lets see!

What is Variable Pay?

While Fixed Pay is paid out in the monthly salary, Variable Pay is held back & disbursed once, twice or quarterly in a year. Also popularly called as Performance Pay, Variable Pay is usually linked to Performance: your own Individual Performance or the Team Performance or the Company Performance.

Why is Variable Pay popular in the Industry?

Prospective candidates often think that the Variable Pay is in, only to inflate the package offered and doesn’t help in the long run. But that’s not true. The primary reason that the Variable Pay has come about is to let the Employee influence how much they earn!
Either you perform superior and get a whopping Variable Pay :-)
Or Perform miserably and get badly hit :-(
It’s a direct Capitalist thought-process. This is not a 9-to-5 Government job - do what you want with all the apathy and you still get all your monthly salary coming from the Taxpayer’s money!

How much Variable Pay is usually offered?

At the junior level, Variable Pay usually ranges upto 5% of the total Compensation. At the middle level, it ranges from 5% to 10% while at senior levels, it is typically between 15% to 20%. More the seniority, more the responsibility and hence more the risk-reward! This also goes well with the life & career expectations of most professionals as they yearn for more stability in the initial part of their career and tend to go for a higher risk profile later on.

How have Companies started using the Variable Pay?

IT companies have started using the Variable Pay to drive up a Performance-oriented Culture and even leverage it to attract and retain the best talent since talented people prefer joining organizations where they will be differentiated on the basis of their performance. Indian companies are also now progressing on par with the West. And since Performance and Compensation often go hand in hand, Variable Pay provides a win-win situation for both the Employee and the Employer.

Should you be concerned at all, if your offer includes a Variable Component

Certainly not! Especially, if your prospective Employer is fair and has a good track record of timely handing out Variable Pay. Also, from your side, if you’re pretty certain about your own ability & performance, you should rest assured. What is your due will certainly be yours!

Key Takeaways:

- Variable Pay lets you influence how much you can earn
- It’s indicator of a Performance-oriented Culture: perform better, earn better
- No need to be concerned, Variable Pay is your due and you will always get it

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