Cite.Co is a repository of information and resources created by industry seniors and experts sharing their real world insights. Join Network
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

Several basic assumptions:

• 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.

Contrast the assumptions above with a pay system based on seniority or length of service:

• 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.

Types of Variable Pay

Variable pay plans can be established that focus on individual performance, team or group performance, and on organization-wide performance. An important feature of variable pay plans is that incentives increase the degree of cooperation in teams, whereas individual incentives do not.

Individual incentives are given to reward the effort and performance of individuals.

Some of the most common means of providing individuals variable pay are piece-rate systems, sales commissions, and bonuses.

Organization incentives reward people for the performance of the entire organization.

This approach reduces individual and team competition and assumes that Organization incentives reward people for the performance of the entire organization.

By Priti Shah

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.

For further Information please Visit us at: HR Services, HR Consulting, HR Consulting Firm, HR Staffing, HR Consultants, HR Outsourcing

Visit Blog at: Laurent and Benon Management Consultants Ltd

Variable salary is good if there are certain fixed criteria for same. It should apply to the high level of management. If the sales in the market is affected due to some policies of the Management like old outdated products, non competitice pricing in a competitive market, then sales person should not be troubled for non performance.
Incentives are good. Its better to not cut variable pay but give incentives or comimission for performance. It will motivate more.

This discussion thread is closed. If you want to continue this discussion or have a follow up question, please post it on the network.
Add the url of this thread if you want to cite this discussion.

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2020 Cite.Co™