Industries across the sectors in India are shifting to variable pay structure post recession, reports Economic Times. The variable component of the salary varies with the performance of the individual or the company and can shrink or expand accordingly.

The report says that the variable percentage has increased across industries such as textiles, FMCG, etc and now ranges between 25%, and to 40%.  Ma Foi Management has been quoted saying even traditional industries such as banking, IT, insurance, oil, manufacturing, and gas will change its fixed salary plan to a variable pay structure.

Variable pay provides a buffer to both companies and employees. In a recession instead of layoffs companies can choose to cut variable component, a lesser evil. When conditions improve, they can increase the variable salary with the assurance that it would be linked to the performance of the individual and the company. During the next downward cycle they would not be stuck with unwieldy salary bills.

There are other advantages of this method as well. The company can also reward individual performers, irrespective of the company’s performance. It would also reward the ones who perform better, rather than a common incentive program for all.