What Is The Meaning Of Fixed Pay And Its Importance | HRMantra HR Software

What Is The Meaning Of Fixed Pay And Its Importance | HRMantra HR Software

4-5 MIN READ

The fixed pay is defined as the sum that is predetermined and fixed, which the company is supposed to pay its employee every month in exchange for their services. It is written on the employee''s salary slip since in some cases it is one part of a salary and in some cases, it is a complete salary.

Table of Content

• What is Fixed Pay
• What is Fixed Pay in CTC
• How Fixed Pay Differs from Variable Compensation
• Advantages and Disadvantages of Fixed Pay
• Introduction How Fixed Pay is to be Decided in the Context of Employment
• Is Fixed Pay Adjustable Over Time? If Yes, What Factors Lead to Such Adjustments?
• What Constitutes Fixed Pay in CTC

What is Fixed Pay

Fixed pay is the stable amount of money you receive on a constant basis, as previously discussed by your employer for your services in return. It does not depend on one''s employee performance or the profit one gets for the company.

What is Fixed Pay in CTC

CTC stands for Cost to Company. CTC consists of the sum paid by a company to their employee in a year. An integral component of CTC is fixed pay, which is the same every month during the year.

How Fixed Pay Differs from Variable Compensation

On the other hand, variable pay is almost always performance-based. This amount can be defined from your performance, commission, achievements, or targets which you have decided with your employer.

Advantages and Disadvantages of Fixed Pay

Advantages

• Fixed salaries make it easier for the employers to set a budget. What you pay to them will always be steady, despite the workload or new projects. Unlike contractors, sometimes your budget can be tricky.
• The cost will remain the same regardless of how hard your employees are working. This means that you will never have to observe the productivity of all your employees at a time. This can save your company a lot of money; this is because sometimes it can be this hard for higher level managers to constantly make evaluations of the number of employees at work and base their compensations on that.

Disadvantages

• With fixed pay, you can almost never ask your employees to work overtime and give them overpay for that. Only the staff working for an hourly income can do that for you. Fixed pay employees are usually contracted to provide 40 work hours per week.
• Some of the employees also earn little under fixed wages, as they can never just work extra hours to get extra money out of their employers. In that way, many of your employees may want to switch if their current job doesn''t take care of their expenditures and bills well.
• No holiday pay for the employees. For example, most workers who are getting paid are getting a higher wage during the holiday season, but then the employees working full time can never get that.

Introduction How Fixed Pay is to be Decided in the Context of Employment

The fixed pay in context of the employment contract is determined in the following forms:

• The amount of fixed pay will be decided with the role and responsibilities which the employee is going to take up.
• It can also be decided with industry standards and market conditions.
• Another feature that may influence it is the nature of the job that the employee is in.
• Some employers may take help from salary survey guides for equalizing the pay of the employees.
• The general economic conditions overall can also become a part of the determining factors for employment contract.
• Other factors may involve the qualifications and negotiating power of the contender, company''s budget, company''s policies, legislative requirement for the job role, employment contract, periodic review, and transparent and equitable structure.

Can the Fixed Pay be Revised Over Time, If Yes, What Factors Go into Making Such Revisions?

Yes, the fixed pay can be adjusted over time. The various factors that contribute to such adjustments can be:

• Employee''s review performance
• Whether there is any promotion for the employee
• On changing of job, the employee''s salary may be increased
• Market conditions can also help in these adjustments.
• At times, inflation and cost of living make the employers give good hikes
• It might also be the general performance of the company, which decides the increasing and declining of fixed pay for the employees.
• Market fixed salary trend, as in the benchmarks that make companies competitive.
• Co-relational factors include longevity and loyalty and may also include contractual agreements.

We hope you get a fair understanding of what fixed pay is and how it differs from variable pay.

Popular Terms