Page 48 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) 23062 COPY.indd
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BFSI Chronicle, 2 Annual Issue, 10 Edition July 2022
nd
th
Variable pay Components aligned instruments in the Variable Pay in case
effectively with Prudent Risk-taking to the Variable Pay contains Share-linked
ensure that Compensation is adjusted Instruments. The Variable Pay should be
for all Types of Risks, the Compensation truly and effectively variable and can be
outcomes are Symmetric with Risk reduced to Zero Based on performance
Outcomes, Compensation Pay-outs are at an individual, business unit, and
sensitive to the time horizon of the Risks, company-wide level.
and the Mix of Cash, Equity and other In order to do so, performance measures
forms of Compensation are Consistent and their relation to Remuneration
with Risk Alignment. Packages should be clearly defined
at the beginning of the Performance
b) Composition of Fixed Pay: All the fixed
items of Compensation, including the Measurement Period to ensure that
the Employees Perceive the Incentive
Perquisites and Contributions towards
Superannuation / Retrial benefits, Mechanism.
may be treated as Part of Fixed Pay. All c) Deferral of Variable Pay: Not all the
Perquisites that are Reimbursable may variable pay awarded after Performance
also be included in the Fixed Pay so Assessment may be paid immediately.
long as there are Monetary Ceilings on A certain portion of Variable Pay, as
these Reimbursements. The Monetary decided by the Board of the Company,
Equivalent of Benefits of Non-monetary may be deferred to the Time Horizon
nature (such as a Free Furnished House, of the Risks. The portion of the deferral
use of a Company Car, etc.) may also be arrangement may be made applicable for
part of Fixed Pay. both Cash and Non-cash Components of
the Variable Pay. The deferral period for
Principles for Variable Pay: such an arrangement may be decided by
a) Composition of Variable Pay: The the Board of the Company.
Variable Pay may be in the form of d) Control and Assurance Function
Share-linked instruments or a mix of Personnel: KMPs and Senior
Cash and Share-linked instruments. It Management engaged in financial
shall be ensured that the Share-linked
control, risk management, compliance,
instruments conform with relevant and Internal Audit may be compensated
Statutory Provisions.
in a manner that is independent of the
b) Proportion: The Proportion of variable business areas they commensurate and
pay in Total Compensation (Total supervise with their vital role in the
compensation includes fixed and variable company. Accordingly, such personnel
pay) needs to be Commensurate with may have a higher proportion of fixed
the Role and Prudent Risk-taking the compensation. However, a reasonable
Profile of KMPs / Senior Management. proportion of compensation may be
At Higher levels of Responsibility, the in the form of variable pay, so that
proportion of variable pay needs to be exercising the options of malus and/
higher. There should be a proper balance or clawback, when warranted, is not
between the Cash and Share-linked rendered infructuous.
The Institute Of Cost Accountants Of India
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