Should we consider variable salary or fixed salary while making an offer letter?

Dear Team,

Having one query, one of my shortlisted candidate having 6lacs fixed+3 lacs variable salary.
So, while offering him salary from my side, whether i should consider his variable salary as well, or only fixed? As in last financial year, he hardly received 10k out of 3lacs as variable input.

Kindly advise the right way to get it done, since his expectation from my side is 15lacs CTC.

Thanks
Shweta

2 Likes

Hi @Shwetagrover

In general, when we frame a CTC offer, only fixed pay is considered, as VP depends on various internal policies that an Org. might have.

In a scenario where an employee needs VP here also, then from CTC 5% to 10% is made as VP in the current Org too.

1 Like

Hi Shweta,

Firstly, every company has their own Variable pay policy based on different parameters.

In some profile specific cases, Variable pay is part of CTC. In such cases, you should Offer on Fixed Salary (with whatever increment you deem fit) and in addition you can mention the Variable pay eligibility along with amount & criteria. Variable pay can be less, same or higher than earlier organisation basis your internal policy & criteria of disbursement.

2 Likes

Hi Dinesh,

At presently, he is looking for only fixed CTC, and not variable.

But demand from fixed 6lakhs to fixed 15 lakhs CTC, is something I believe is not fair from demand perspective.

Kindly advise what should be the ideal CTC I should offer him?

Thanks

1 Like

Hi Shweta,

Variable pay is always a part of CTC. Only the payout is dependent on performance or certain target achievements by the employee. Example: Rs.10L is CTC of which 90% is fixed and 10% is Variable depending on performance assessment. the actual payout can finally be full 10% or less, based on final assessment and decision by the Manager/HR.
Hope this helped.

Regards,
Vinod.

1 Like

Hi Vinod,

In that case, shall i consider his full 9lacs CTC (6 fixed+3 variable) to release offer?

Pl advise.

Thanks

2 Likes

Yes pls, that is the right way.

1 Like

Dear @Shwetagrover

From the figures you have mentioned 50% is Variable CTC, this is very high when compared to a normal range of 10-20% variable.

It depends on your company’s salary structure also. Are you providing Variable CTC? If yes then you can go ahead and offer the candidate the similar way i.e 1/3 as a Variable out of total CTC.

If you are not having a Variable CTC concept in your company then you have to consider only the Fixed CTC and average of Variable CTC which he got from the previous employer. Based on that you can decide and offer the candidate.

Thank you everyone for guiding me.

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