Pay for Skills "in use"

A dot.com firm hires its employees with the following package:

• Every employee would spend at the most two months on the bench, i.e., not assigned to any project. For this period, the employee would receive his pay in two major components–basic pay, of say, Rs 6,000 and a learning allowance of Rs 5,000 a month. 
  
  
  
  
  
  
  
  

• During the ten or more months the employee is employed in projects, this learning allowance would be withdrawn. The employee's pay would now include three major components–basic pay of Rs 6,000 a month, a variable pay depending on his performance which may be up to 150 percent of the basic and a project completion bonus which may be up to 100 percent of the basic pay. This means that the maximum earning opportunity of the employee is Rs 21,000 per month on these three components. 
  
  
  
  
  
  
  
  

• The firm contractually ensures that employees of equal ability are benched for equal periods.

The above method offers a way to pay for skills "in use", which is a further refinement of the system of paying for the "hot skills" that an employee possesses. Linking a substantial part of the total compensation to employee performance provides a powerful tool for motivating, retaining, and rewarding employees for achieving business results. At the same time, decreasing the total pay out to the bench employees enables the firm to manage its working capital more efficiently. A better version of this system may include offering the employees the options of replacing the learning allowance by intensive training programmes, conducted by specialists, on the latest technologies that the bench employees are expected to work on shortly. Acquiring such expertise and skill upgradation from the marketplace would definitely prove a beneficial proposition for the employee.