Variable Pay: Incentives for Performance
Variable pay is compensation linked to individual, team, and/or organization performance. Traditionally also known as incentives, variable pay plans are attempts to tie additional tangible rewards given to employees for performance beyond normal expectations. The philosophical foundation of variable pay rests on
- Some jobs contribute more to organizational success than others.
- Some people perform better than others.
- Employees who perform better should receive more compensation.
- A portion of some employees’ total compensation should be given to reward above-satisfactory performance.
- Time spent each day is the primary measure of short-term contribution.
- In the long term, length of service with the organization is the primary differentiating factor among people.
- Differences in individual contributions to the organization are recognized through different base pay levels.
- Giving additional performance rewards to some people but not others is divisive and hampers employees working together.
Some of the most common means of providing individuals variable pay are piece-rate systems, sales commissions, and bonuses.
This approach reduces individual and team competition and assumes that Organization incentives reward people for the performance of the entire organization.
Laurent & Benon Management Consultants Ltd, a public limited company with its corporate office Gurgaon with Pan-India presence. We as an organization strive to offer the right Human Resource Solutions at the right time and enable our clients to enhance the net worth of their human resource capital.
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