Hi!
I want to implement a performance-based variable pay system in my organization. Can anyone tell me how I can implement the same and how I should consider the organization's performance while giving rewards to employees?
Thanks,
Amit
From India, New Delhi
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4I want to implement a performance-based variable pay system in my organization. Can anyone tell me how I can implement the same and how I should consider the organization's performance while giving rewards to employees?
Thanks,
Amit
From India, New Delhi
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Amit,
One way to introduce performance-based pay hikes is to keep a band of salary hikes that are kind of assured to an employee with expected performance (say a 3 rater). Based on the ratings one gets in appraisals, they get an additional hike on that basic hike.
For example, a person who gets a rating of 3 out of 5 will get an 8% hike. Now, you could frame something like this:
- A 3.5 rater will get an additional 3%, making it a total of 11%.
- A 4 rater will get an additional 7%, totaling 15%.
- A 4.5 rater will get an additional 10%, totaling 18%, etc.
This will be truly based on the ratings a person receives when their performance is appraised at the year-end and will motivate individuals to perform better in the coming year. It will help distinguish good performers from average performers and reward them accordingly.
Cordially,
Preet
From India, Bangalore
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One way to introduce performance-based pay hikes is to keep a band of salary hikes that are kind of assured to an employee with expected performance (say a 3 rater). Based on the ratings one gets in appraisals, they get an additional hike on that basic hike.
For example, a person who gets a rating of 3 out of 5 will get an 8% hike. Now, you could frame something like this:
- A 3.5 rater will get an additional 3%, making it a total of 11%.
- A 4 rater will get an additional 7%, totaling 15%.
- A 4.5 rater will get an additional 10%, totaling 18%, etc.
This will be truly based on the ratings a person receives when their performance is appraised at the year-end and will motivate individuals to perform better in the coming year. It will help distinguish good performers from average performers and reward them accordingly.
Cordially,
Preet
From India, Bangalore
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You can try this way.
Normally, performance pay is an annual payment, which will be in lieu of a bonus. This is more like sharing the profit of the business based on the business results and the employee's performance. To calculate the performance pay, the system that we follow is:
Individual performance is rated on a 5-band scale starting from Unsatisfactory to Exceptional, which is factored on a scale of 1 to 10. Company Performance is calculated on various factors, which will be assessed by the Top Management and is on a scale of 1 to 3.
For example: an individual is rated for his performance on the 5-band scale, and his corresponding incentive factor is 7.5. The company is rated 2.7 by the management. His incentive is calculated as follows:
7.5 x 2.7 = 20.25 x Gross Annual Cost / 100
For example, if his Gross Annual Cost is 400,000, his incentive would be 20.25% of his Gross Annual Cost, i.e., Rs. 81,000.
Hope this information is helpful to you.
From India, Mumbai
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Normally, performance pay is an annual payment, which will be in lieu of a bonus. This is more like sharing the profit of the business based on the business results and the employee's performance. To calculate the performance pay, the system that we follow is:
Individual performance is rated on a 5-band scale starting from Unsatisfactory to Exceptional, which is factored on a scale of 1 to 10. Company Performance is calculated on various factors, which will be assessed by the Top Management and is on a scale of 1 to 3.
For example: an individual is rated for his performance on the 5-band scale, and his corresponding incentive factor is 7.5. The company is rated 2.7 by the management. His incentive is calculated as follows:
7.5 x 2.7 = 20.25 x Gross Annual Cost / 100
For example, if his Gross Annual Cost is 400,000, his incentive would be 20.25% of his Gross Annual Cost, i.e., Rs. 81,000.
Hope this information is helpful to you.
From India, Mumbai
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Employee Performance.pdf
VARIABLE PAY.doc