Variable component in pay on rise
Moving towards variable and flexi benefits

The variable component in the salary of senior management has risen to 25-30 per cent from the earlier 18-20 per cent, said a study released by Bangalore-based staffing firm TeamLease on Wednesday. The study also said the variable factor has gone up to 18-20 per cent from 10-12 per cent and 10-12 per cent from 5-8 per cent in the mid-management and junior management categories, respectively.

As per the TeamLease Compensation & Total Rewards Trends Report, executive compensation is heavily loaded with components and they comprise almost half the total compensation, right at the top.

For a mid-management employee, the actual average variable pay stands at 15.1 per cent while the same for a CXO is 22.8 per cent. The changing dynamics of the job industry seems to be impacting the rewards and compensation structure, said the report. It added that both employees and employers seem to be moving towards total rewards wherein the share of variable pay and flexi benefits are significant.

A radical compensation mix — comprising 40 to 60 per cent fixed-to-variable and 38 to 85 per cent intangible-to-tangible — is ushering in the ‘total rewards’ era in India, the study revealed. “With nil impact of GST on gifts and perquisites, and little impact on most other components, flexi-benefits potentially increase net income for employees by 28 per cent,” said the report.

However, a senior executive working with a top IT firm here said, “Variable, flexi etc are always convenient terms for employers, and not so much for employees irrespective of the cadre, to ensure minimum payout. Variable is the portion of compensation determined by the performance of the employee, most companies also link variable payout with the performance of the team, department, vertical, geography and company overall etc. Therefore, the net income increase is mostly in single digits; of course, there are exceptions.’’

The TeamLease study further said that benefit plans impact the decisions of some 74 per cent of potential employees, while health/wellness plans and financial benefits help companies retain 57 per cent of their workforce.

Sonal Arora, vice-president, TeamLease Services, said, “While flexi benefits have become a popular medium to please and retain employees, organisations need to be honest with their intent, put earnest effort and prioritise on aligning rewards with business objectives, communicate effectively and personalisation.”

What are flexible benefits? Traditional sectors like manufacturing, healthcare & pharma, BPO/ITeS offer a wide range of options in the compensation and benefits mix, to cater to a broad-based workforce, said the report. The new economy businesses like BFSI, e-commerce, IT, telecommunication and FMCG/D have rationalised the benefits mix by stripping it of elements that employees perceive as irrelevant. Also, sectors like retail, media and entertainment, travel and tourism, which are seen to be fun places to work at, have a lean compensation and benefits structures.