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Free letter template · Word

Compensation Revision Letter

A compensation revision letter communicates a change to the employee's full reward package, not just salary, covering fixed pay, target variable pay and benefits such as insurance cover, car lease or stock options. It is suited to mid and senior roles where the package has several parts.

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Preview of the letter

[Highlighted] = fill in
[Company Logo][Company Name]

COMPENSATION REVISION LETTER

Ref. No.:
[Reference Number]
Date:
[Date]

Strictly Confidential
To,
[Employee Name]
Employee ID: [Employee ID]
[Designation], [Department]

Subject: Revision of Your Compensation Package

Dear [Employee Name],
Following the recent review of your role and contribution, the Compensation Committee has approved a revision of your total compensation package with effect from [Effective Date].

ElementCurrentRevised
Fixed Annual Pay (₹)[Amount][Amount]
Target Variable Pay (₹)[Amount][Amount]
Fixed : Variable Mix[Ratio][Ratio]
Total Annual CTC (₹)[Previous CTC][CTC]
Group Medical Cover₹[Amount] – [Self / Family]₹[Amount] – [Self / Family / Parents]
Car Lease / Vehicle Allowance[Details][Details]
Mobile and Internet Reimbursement₹[Amount]/month₹[Amount]/month
Stock Options[Number] optionsAdditional [Number] options as per grant letter

A component-wise breakup of your fixed pay is attached as Annexure A. Variable pay will continue to be governed by the [Variable Pay Policy], and any stock options by the [ESOP Plan Name] and your grant letter, which prevail over this summary.

All other terms of your employment remain unchanged. Please sign and return a copy of this letter to confirm acceptance.

With appreciation,

For [Company Name]
[Authorised Signatory]
[Designation]
Accepted by
[Employee Name]
Date: [Date]

What this template includes

  • Fixed, variable and total CTC before and after
  • Change in fixed-to-variable mix
  • Benefit changes (insurance, car, phone, ESOP)
  • Effective date
  • Reference to separate plan documents
  • Acceptance

When to use it

  • Revising a senior employee's package across fixed, variable and benefits
  • Upgrading insurance or allowances alongside a pay change
  • Changing the fixed-to-variable mix for a role
  • Granting stock options or long-term incentives with a revision

How to customise this template

  1. 1Fill every reward element that changes; delete those that do not
  2. 2For ESOPs, refer to the grant letter rather than repeating terms
  3. 3Explain any mix change and its impact on guaranteed pay
  4. 4Attach a revised CTC annexure

HR tips

  • Show the fixed-pay change separately so it is not hidden in total CTC
  • Use the same benefit names as policy documents
  • Do not promise ESOP values; refer to the plan
  • Walk senior employees through the letter in person

For HR & hiring managers

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Frequently asked questions

What is the difference between compensation and salary?+

Salary usually means fixed cash pay. Compensation covers the total package, including variable pay, benefits and long-term incentives.

Can the fixed-to-variable mix be changed?+

It can, but it affects guaranteed pay, so it should be explained in writing and accepted by the employee.

Should ESOP details be in the compensation letter?+

Mention the grant briefly and refer to the separate ESOP grant letter and plan for vesting and exercise terms.