MANAGERIAL COMPENSATIONSALARY ANALYSIS- TRANSFORMER SALES

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BY:

Anshu Sethia

Anurag Anand

Ayushi Anand

M. Kavita

Rohit Mittal

Shweta Shukla

Sugam Malhotra

Vineet Gijre

Table of ContentsENTRY LEVEL................................................................................................................................................2

LARSEN & TOUBRO..................................................................................................................................2

SALARY COMPONENTS........................................................................................................................2

INCENTIVES AND ALLOWANCES..........................................................................................................2

SIEMENS..................................................................................................................................................3

SALARY, ALLOWANCES AND INCENTIVES COMPONENTS....................................................................3

SCHNEIDER ELECTRIC INFRASTRUCTURE LIMITED...................................................................................4

SALARY, ALLOWANCES AND INCENTIVES COMPONENTS....................................................................4

COMPARATIVE ANALYSIS.........................................................................................................................4

MANAGER LEVEL.........................................................................................................................................6

SALARY STRUCTURES OF LARSEN & TOUBRO AND SIEMENS...................................................................6

COMPARATIVE ANALYSIS.........................................................................................................................7

GM LEVEL....................................................................................................................................................9

SALARY STRUCTURE OF LARSEN & TOUBRO............................................................................................9

RECOMMENDATIONS................................................................................................................................10

BASIC SALARY........................................................................................................................................10

ALLOWANCES........................................................................................................................................10

VARIABLE PAY........................................................................................................................................11

SALARY STRUCTURE OF AN ENTRY LEVEL EMPLOYEE............................................................................11

SALARY STRUCTURE OF A MANAGER....................................................................................................12

SALARY STRUCTURE OF A GENERAL MANAGER.....................................................................................13

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ENTRY LEVEL

LARSEN & TOUBRO

SALARY COMPONENTS

Components of the salary Amount (INR) Percent of CTC

Basic 120000

HRA 60000 50

Conveyance 36000 6.07

Special Allowance 180000 30.35

Team Performance Bonus 75000 12.64

Total Base (A) 471000

INCENTIVES AND ALLOWANCES

Components Amount (INR) Percent of CTC

LTA 20,000 3.37

Telephone 6,000 1.01

Medical 36,000 6.07

CCA 60,000 10.11

Total Incentives (B) 1,22,000

Total (A+B) 5,93,000

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SIEMENS

SALARY, ALLOWANCES AND INCENTIVES COMPONENTS

ComponentsAmount

(INR p.m.)

Amount

(INR p.a.)

Percent

of CTC

(A) Basic Salary 11696 140352

Allowances / Benefits

House Rent Allowance 5,848 70176 50Based on Basic

pay

Conveyance Allowance 1,100 13200 3.3

Based on target

Pay

Medical Allowance 1,250 15000 3.75

Special Allowance 6,048 72576 18.14

Leave Travel Allowance (#) 1,333 15996 3.99

(B) Total Allowances/Benefits 15,579 186948

Base Pay (A+B) 27,276 327300 (C) 81.82

Retiral Benefits (Annual)

Company's Contribution to PF (12%

of Basic Salary)16,843 4.21

Company's Gratuity Provision

(4.81% of Basic Salary)6,751 1.68

Total Retiral Benefits 23,594 (D) 5.89

(E) Total Fixed Pay (TFP) (C+D) 3,50,904

(F)Performance Pay @ 100% p.a. on

Base49,096

(G) Target Pay p.a. (E+F)

4,00,000

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SCHNEIDER ELECTRIC INFRASTRUCTURE LIMITED

SALARY, ALLOWANCES AND INCENTIVES COMPONENTS

EARNINGSAmount (INR

p.m.)

Amount (INR

p.a.)

Percent of

CTC

Basic 14,455 1,73,460

HRA 7,227 86,724 49.99

CONVEYANCE ALLOWANCE 800 9,600 2.59

SPECIAL ALLOWANCE 10,456 1,25,472 33.90

Total Rs. 32,938 3,95,256

DEDUCTIONS

PF 1,735 20,820 5.62

CANTEEN 360 4,320 1.16

Total 2,095 25,140

Net Salary Rs. 30,843 3,70,116

COMPARATIVE ANALYSIS

Schneider Electric Infrastructure Limited, L&T and Siemens are in transformer industry but still

their compensation structure varies.

Particulars L &T Siemens Schneider

HRA 50% 50% 50%

Conveyance 6.07% 3.3% 2.6%

Special allowance 30.35% 18.14% 34%

Medical Allowance 6.07% 3.75 N\A

Leave Travel Allowance 3.37% 4% N\A

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From the above table it can be seen as in HRA all the companies have a standard of 50% of

Basic, but variance is there w.r.t. conveyance and special allowance. Where in L&T conveyance

is 6% in Schneider it is 2.6% only.

Siemens pays a special allowance of only 18.14% as compared to other to companies which pay

a significant amount of 30%-34% of total pay.

Schneider as compared to other two companies does not pay Medical allowance and LTA.

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MANAGER LEVEL

SALARY STRUCTURES OF LARSEN & TOUBRO AND SIEMENS

SNo. Heads of Payment Amount (INR)

L&T Siemens

(A) Basic Salary p.m. 25,000 29,241

Allowances / Benefits p.m.

House Rent Allowance 10,000 14,621

Conveyance Allowance 15,000 1,100

Medical Allowance 3,000 1,250

Special Allowance 25,000 20,645

Telephone 1,000 -

CCA 7,500 -

Education Allowance 1,500 -

Loan 8,333.33 -

Leave Travel Allowance (#) 30,000 1,333

(B) Total Allowances / Benefits p.m. 10,1333.33 38,949

(C) Base Pay p.m. (A+B) 12,6333.33 68,190

(D) Base Pay p.a. (C*12) 15,16000 81,8280

Retirals (Annual)

Company's Contribution to PF (12% of Basic Salary) 36,000 42,107

Company's Gratuity Provision (4.81% of Basic

Salary) 14,430 16,878

(E) Total Retirals p.a. 50,430 58,985

(F) Total Fixed Pay (TFP) p.a (D+E) 15,66,430 8,77,265

Ecal & Reptation Pay 10,00,000 -

Performance Bonus 1,50,000 1,22,741

(G) Max Variable Component 11,50,000 1,22,741

(H) Target Pay p.a. (F+G) 27,16,430 10,00,006

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(I) Target Pay p.m. 2,26,369.16 83,333.83

COMPARATIVE ANALYSIS

S.No Heads of Payment

As % Of Basic Salary (per month)

As % Of Target Pay (per annum)

As % Of Target Pay (per month)

L&T Siemens L&TSiemen

s L&T Siemens

(A) Basic Salary p.m. 11.04 35.09Allowances / Benefits p.m.

House Rent Allowance 40.00 50.00 4.42 17.55Conveyance Allowance 6.63 1.32Medical Allowance 1.33 1.50Special Allowance 11.04 24.77Telephone 0.44 0.00CCA 3.31 0.00Education Allowance 0.66 0.00Loan 3.68 0.00Leave Travel Allowance (#) 13.25 1.60

(B)Total Allowances / Benefits p.m. 44.76 46.74

(C) Base Pay p.m. (A+B) 55.81 81.83(D) Base Pay p.a. (C*12) 55.81 81.83Retirals Annual(E) Total Retirals p.a. 1.86 5.90

(F)Total Fixed Pay (TFP) p.a (D+E) 57.67 87.73Ecal & Reptation PayPerformance Bonus

(G) Max Variable Component 42.33 12.27(H) Target Pay p.a. (F+G)(I) Target Pay p.m.

The composition of the salary structure of manager sales in transformer industry varies with the

company they are working in. For example, as illustrated above, the HRA varies between 40%

and 50% in Larsen and Toubro and Siemens. The ratio of variable to fixed pay also varies from

company to company. Larsen and Toubro emphasize more on variable pay, which is similar to

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industry pattern for sales whereas in Siemens the fixed component is more. The max variable

component in L&T is around 43% while in Siemens its only 12%.

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GM LEVEL

SALARY STRUCTURE OF LARSEN & TOUBRO

Components of the salary Amount (INR) Percent of CTC

Basic 6,00,000

HRA 2,40,000 40

Conveyance 2,40,000 5.384

Special Allowance 4,00,000 8.973

Performance Bonus 3,00,000 6.729

Ecal & Reptation Pay 2,00,0000 44.86

Total 37,80,000(A)

Incentives and Allowances Amount (INR) Percent of

CTC

Uniform Allowance

LTA 50,000 1.122

Telephone 24,000 0.538

Medical 1,00,000 2.243

Food Coupons

TOTAL 1,74,000(B) 3.903

Education Allowance 24,000 0.538

CCA 1,80,000 4.038

Loan 3,00,000 6.729

TOTAL 5,04,000(C)

TOTAL SALARY (A+B+C) 44,58,000

We could not do a comparative analysis for GM level as we could not get data for this position.

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RECOMMENDATIONS

With the analysis of salary structures, we have come up with the salary structure for an entry

level employee, manager and general manager for a company involved in transformer sales.

The components across the levels are divided into following buckets

Basic salary

Allowance kitty

Special allowance

Variable component

Retiral Benefits

The components would vary across the levels.

We have adopted a Flexible compensation plan (Cafeteria plan) for the compensation

structure across levels. This would allow the employee to design his/her allowance according to

his/her needs, which would lead to employee satisfaction.

BASIC SALARY

Every employee would be paid a fixed amount of basic salary depending on the level s/he falls.

ALLOWANCES

Every employee will be given fixed amounts for

Allowance kitty

Special allowance

List of allowances for allowance kitty & special allowance

The employee will have the discretion to opt for allowances of his/her choice in the “allowance

kitty” and “special allowance”. Employee may also restructure the amount between the

allowances in each bucket. The components in each of the bucket would vary across every level.

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VARIABLE PAY

The variable pay across the levels will be disbursed based on the following to factors:

Unit Performance

Company performance

Weight age for the Unit performance would be 60 % while that of the company’s performance

would be 40 %. This was a common trend observed across organizations involved in transformer

business.

SALARY STRUCTURE OF AN ENTRY LEVEL EMPLOYEE

COMPONENTS Amount (INR) % OF CTCBasic 1,62,000 36.00

Allowance Kitty

HRA 81,000 18.00Conveyance 9,600 2.13Food Coupons 48,000 10.67Medical Allowance 15,000 3.33LTA 12,000 2.67

Total Allowance kitty 1,65,600 36.8Special Allowance Special Allowance 47,113 10.47Total Fixed Salary 3,74,713 83.27

Variable Team Performance Bonus 54,000 12.00

Retiral BenefitsPF 13,495 3.00Gratuity 7,792 1.73CTC 4,50,000

Special Allowance Amount (INR)Uniform Allowance 40,000Entertainment Allowance 5,000Mess Allowance 2,113Total 47,113

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Going by the industry analysis at the entry level, we come to a conclusion that L&T is the market leader and the median pay for the entry level is hovering somewhere around Rs. 4,00,000. So, we decided to keep ourselves at 112th percentile of the median.

The team performance bonus is a total of 12% of the total pay. This 12% is further divided into 40% organizational performance and 60% unit performance. This gives us the internal alignment for the role.

SALARY STRUCTURE OF A MANAGER

COMPONENTS INR % OF NET SALARY

Basic Salary p.m. 4,00,000 25.00

Allowance Kitty

House Rent Allowance 2,00,000 12.50Conveyance Allowance 9,600 0.60Medical Allowance 15,000 0.94Telephone 25,000 1.56Food Coupons 48,000 3.00Education Allowance 25,000 1.56Loan 2,00,000 12.50Leave Travel Allowance (#) 12,000 0.75

Total Allowance Kitty 5,34,600 33.41Special Allowance Special Allowance 78,160 4.89

FIXED SALARY 10,12,760

63.30

Variable Salary Performance Bonus 5,20,000 32.50

Retirals Annual

Company's Contribution to PF (12% of Basic Salary)

48,000 3.00

Company's Gratuity Provision (4.81% of Basic Salary)

19,240 1.20

Total Retirals p.a. 67,240 4.20

CTC 16,00,000

Special Allowance Amount (INR)Uniform Allowance 40,000Fuel 30,000Entertainment Allowance 5,000Messing Allowance 3,160Total 78,160

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SALARY STRUCTURE OF A GENERAL MANAGER

Heads of Payments Individual Components Amount (In Rs. p.a) % of CTC

Basic Salary 4,80,000 15

Allowances Kitty

House Rent Allowance 2,40,000 7.5Conveyance Allowance 9,600 0.3Medical Allowance 15,000 0.47Telephone 40,000 1.25Food Coupons 48,000 1.5Education Allowance 25,000 0.78Loan 4,00,000 12.5Leave Travel Allowance (#) 12,000 0.38

Total Allowances Kitty 149600 24.68Special Allowance Special Allowance 4,09,712 12.8

Retirals Annual

0

Company's Contribution to PF

57,600 1.8 (12% of Basic Salary)

Company's Gratuity Provision

23,088 0.72(4.81% of Basic Salary)Total Retirals p.a. 80,688 2.52

Performance Bonus 14,40,000 45

CTC 32,00,000

Special Allowance Amount (INR)Uniform Allowance 40,000Fuel 50,000Entertainment Allowance 5,000International travel allowance 2,00,000Driver Allowance 1,14,712Total 4,09,712

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