If you are working in Singapore, you may have heard of the term Monthly Variable Component (MVC) in your salary package. But what exactly is MVC and why is it important for both employee and company?
Let’s explore the concept of MVC, its benefits and drawbacks, and how to negotiate it with your employer.
What is MVC?
MVC is a part of your monthly salary that can vary depending on the performance of your company, the industry, or the economy. It is usually expressed as a percentage of your basic salary. It can be adjusted up or down by your employer every month.
For example, if your basic salary is $4,000 and your MVC is 10%, your total monthly salary will be $4,400. However, if your employer decides to reduce the value by 2% due to poor business conditions, your total monthly salary will drop to $4,320.
The purpose of MVC is to provide flexibility for employers to cope with changing business situations and to align employees’ interests with the company’s goals. By having a variable component in the salary, employers can save on labor costs when times are tough. Reward employees when times are good. Employees, on the other hand, can benefit from higher pay when the company performs well and share the risk when the company faces challenges.
MVC has several benefits for both employee and company, such as:
- It encourages employees to work harder and smarter, as they know that their pay is linked to the company’s performance. This can improve productivity, innovation, and customer satisfaction.
- It allows employers to adjust their labor costs according to the business situation, without resorting to layoffs or pay cuts. This can help them maintain their competitiveness and profitability in the long run.
- It fosters a culture of teamwork and collaboration among employees, as they share the same vision and goals with the company. This can enhance employee engagement, loyalty, and retention.
- It provides employees with an opportunity to earn more than their basic salary when the company does well. This can boost their morale, motivation, and financial well-being.
MVC also has some drawbacks for both employee and company, such as:
- It reduces employees’ income stability and predictability, as they may face fluctuations in their monthly pay. This can affect their budgeting, planning, and saving for their personal and family needs.
- It exposes employees to the risk of lower pay when the company performs poorly or faces external shocks. This can cause stress, anxiety, and dissatisfaction among employees.
- It may create resentment or conflict among employees, especially if they perceive that the MVC is not fair or transparent. For example, some employees may feel that they are not rewarded for their individual contributions or that they are penalized for factors beyond their control.
- It may discourage employers from investing in employee development or welfare. As they may rely on MVC as a short-term solution to manage their labor costs. This can affect their long-term growth and sustainability.
How to negotiate MVC
If you are offered a salary package with MVC, you should consider several factors before accepting or rejecting it. Some of these factors are:
- The percentage of MVC in your total salary: Generally speaking, the higher the percentage of MVC, the higher the risk and reward for you. You should assess your risk appetite and financial goals before agreeing to a high or low MVC.
- The criteria and frequency of MVC adjustment: You should ask your employer how they determine and communicate the value every month. You should also find out how often they review and revise the MVC based on the business situation. You should look for clear and objective criteria that reflect your performance and contribution.
- The market rate and industry practice: You should do some research on the average salary and MVC for your position and industry in Singapore. You should compare your offer with the market rate and industry practice to see if it is competitive and reasonable.
- The company’s performance and outlook: You should evaluate the company’s past performance and future prospects before accepting a salary package with MVC. You should look for signs of stability, growth, and profitability that can support a high or consistent value.
If you are not satisfied with the offer or have any concerns about the MVC, you should try to negotiate with your employer for a better deal. You should highlight your skills, experience, and achievements that add value to the company. You should also be prepared to compromise and find a win-win solution that meets both your needs and expectations.
MVC is a common feature in Singapore’s salary packages that can have advantages and disadvantages for both employee and company. It is important for you to understand what MVC is, how it works, and how it affects your pay before accepting or negotiating it with your employer. By doing so, you can make an informed decision that suits your career and financial goals.
With advanced features and capabilities, HR software like HRMLabs streamlines the calculation and tracking of MVC, ensuring accuracy and transparency. The software can generate real-time reports, allowing both employers and employees to monitor the performance-based component of their salaries effortlessly. Navigate the intricacies of MVC more efficiently, contributing to a harmonious and productive work environment.