Variable Pay Structure [Thread 368529]

HI
If anyone could tell me the benefits of Variable pay structure?? I am in an IT company.
we wish to switch to variable pay structure i.e. 60% of salary would consist of fixed components and 40% would be performance variable and effect of appraisals would be done on 40%. Please let me know whether this variable pay structure would be good for employees?

Thanks Himadri...
But we already have policy of deducting some amount from salary for retaining the employees. As u are saying that u show variable part apart from gross salary so in this case total CTC would increase?? Like if an employee's per month salary is 10000/- then his CTC would be 1,20,000/- so we have to show 120000+varaiable part in offer letter? is it the case?
regards
Nikita