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    PLI Calculation

    Uploaded by

    Reji Muralidharan
    performance link incentive

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    PLI Calculation

    Uploaded by

    Reji Muralidharan
    1 views2 pages
    performance link incentive

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    © © All Rights Reserved

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    PDF, TXT or read online from Scribd

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    performance link incentive

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    1 views2 pages

    PLI Calculation

    Uploaded by

    Reji Muralidharan
    performance link incentive

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    The term performance incentive refers to performance-based pay programs where an

    employee is incentivized and rewarded for achieving higher goals and objectives.
    Companies have many incentives, some tying pay to individual performance and
    some to companywide performance. Pay-for-performance plans are very common
    among organizations. Pay-for-performance is generally given for specific performance
    results rather than simply the time worked. Here we have talked about performance-
    linked incentives, their calculation, and more.

    What is PLI?

    A performance-linked incentive (PLI) is a form of payment from an employer to an


    employee, which is directly related to the performance output of an employee and
    which may be specified in an employment contract. PLI may either be open-ended
    (does not have a fixed ceiling) or close-ended (have an upper ceiling which is normally
    stipulated in the employment contract). Open-ended incentives are normally
    applicable to revenue-generating activities (e.g., sales), while close-ended incentives
    are associated with support functions (e.g., operations, human resources,
    administration, etc.)

    Understanding Performance-Based Compensation:

    Performance-based compensation rewards an employee for meeting certain


    performance targets or for high-quality work. It is a reward for their hard work and acts
    as an acknowledgment of their contribution to the company as well as functioning as
    an incentive to stay with the company.
    Performance-based incentive programs are based on the very belief that individuals
    will expand efforts to achieve performance objectives which they suppose will lead to
    valued outcomes. Organizations using performance-based incentives enhance their
    schemes effectively to elicit the desired behavior from their people. It is also a good
    way to drive a performance-driven culture while emphasizing the values the
    organization stands for.

    PLI forms 10% of the CTC for employees, who are in the manager cadre. (i.e. Sr.
    Manager and above).

    PLI is forms an integral part of the performance review and is paid along with the yearly
    increments to the eligible employees.

    Pay-out of Performance Linked Incentive:

    PLI is comprises of 2 parts:

    a. Business Performance – which contributes towards the 30% of the PLI


    calculation.
    b. Individual Performance – which contributes towards the 70% of the PLI
    calculation.
    For Example:

    a. If an employee in the grade of Sr. Manager and above has CTC of Rs. 15 lacs
    per year then the calculation is as below:

    Sr.No. Description Amount (Rs)


    1. Annual CTC Rs. 15,00,000.00
    2. PLI @10% of the CTC Rs. 1,50,000.00
    3. Performance Contribution of PLI
    a. Company Revenue Performance @ Rs. 45,000.00
    30%
    b. Individual Performance of the Rs. 1,05,000.00
    employee against his KRA @ 70%

    Calculation for PLI Payout Amount to Paid (Rs.)


    1. Revenue performance of the Company
    a. Revenue Target achieved >= 100% Rs. 45,000.00
    b. Revenue Target achieved <= 100% Rs. 40,500.00
    and >=90% PLI to be paid @ 90%
    c. Revenue Target achieved <=89% and Rs. 33,750.00
    >=75%, PLI to be paid @75%
    d. Revenue Target achieved <=74% no
    PLI to be paid against revenue
    performance of the company.

    2. Individual performance against the KRA.


    a. If KRA rating is = 5, then 100% PLI to Rs. 1,05,000.00
    be paid
    b. If KRA rating is above >= 4 and < 5, Rs. 84,000.00
    then PLI to be paid @80%
    c. If KRA rating is >=3 and < 4, then PLI Rs. 73,500.00
    to be paid @ 70%
    d. If KRA rating is < 3 then no PLI will be
    paid against the individual KRA
    performance.

    Note:
    1. PLI pay-out will be paid along with the increment and subject to TDS as
    applicable.
    2. Management, reserves the right to consider the revision of pay-out % on
    yearly basis, depending on the business requirement and scenario.

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