What is the guarantee of a salary being tied to KPIs?

Friday April 19 2019

By Caroline Mboijana

My employer wants to tag my salary to some KPIs. The salary is divided into two. The retainer and the other is variable. This variable one, is tagged to KPIs. What is the guarantee on it? I feel it’s a raw deal, and the retainer salary is quite low. Rachel

Dear Rachel,
Your organisation is very progressive in how they manage their reward and remuneration. The growing trend for organisations is to move away from the traditional pay structure and to introduce a mechanism / structure that you have shared, which focuses on linking reward to performance.

What is happening here is a shift in how organisations and employees think about the relationship between pay and performance.

Before you sign the contract, you should seek clarification on what other elements, apart from a pay element linked to KPI’s, make up the variable pay. It is important for you to have a good understanding on what has been taken into consideration. This will allow you to negotiate if the need arises.

The “raw deal” that you mention is influenced by a number of factors. First, is the amount of money that is defined in the retainer and second is the element of the variable pay and whether or not you can exceed the target. It is critical to remember that in this pay structure, the focus is on exceeding your targets, achieving your targets may not be enough, achieving targets results in getting the base bonus, while exceeding your targets will result in receiving a significantly larger reward.

The variable pay element that is linked to the KPI is guaranteed as long as you exceed your targets.
So as long as you exceed your targets, then your guaranteed to get rewarded. If you do not exceed, then you will not get rewarded.

Caroline Mboijana
Managing Director
The Leadership Team (U)