1
Company numbers: from revenue to PAT
| Company data | Last FY actual | % of revenue | This FY budget | % of revenue |
|---|---|---|---|---|
| Revenue | ||||
| Gross profit | ||||
| People cost (fixed) | ||||
| People cost (variable) | ||||
| PAT (profit after tax) |
People covered by the variable pay plan
The base every incentive % is applied to
2
Sizing the pool: three ways to look at it
Set the share the owners are comfortable giving under each method. The pool is then compared with the eligible salary base.
| Method | Your % | Pool (₹ lakh) | % of eligible salary |
|---|---|---|---|
| As a % of PATShare of profit after tax the owners are willing to give. | % | ||
| As a % of revenueShare of every rupee of revenue set aside for incentives. | % | ||
| As a % of gross profitShare of gross profit set aside for incentives. | % |
3
The comfort number
The maximum incentive budget, as a % of eligible salary. Plans usually pay out 40–60% of the maximum, so the expected cost is lower than the budget.
% of salary
% of maximumPlans usually pay 40–60%.
If everyone hits maximum
Incentive budget (₹ lakh / yr)
As % of PAT
As % of revenue
As % of gross profit
PAT after incentive
At expected payout
Expected cost (₹ lakh / yr)
As % of PAT
As % of revenue
As % of gross profit
PAT after incentive
4
Plan design: process vs outcome
Split each person's maximum between Process Discipline (paid monthly) and Outcome (the Altimeter, paid annually).
%
Caps, % of salary
Process Discipline cap (monthly)
Outcome cap (annual)
Total maximum