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Variable Pay Systems
[{"left":"Variable Pay Systems Major types of variable pay are bonuses, incentives, stock-options, and commissions. They are typically linked to performance of either the individual or the team\n\n
","right":"http://student.land/variable-pay-systems-major-types-of-variable-pay-are-bonuses-incentives-stock-options-and-commissions-they-are-typically-linked-to-performance-of-either-the-individual-or-the-team/\n\nVariable Pay Systems\n\nMajor types of variable pay are bonuses, incentives, stock-options, and commissions. They are typically linked to\n\nperformance of either the individual or the team, and are based on the philosophy--employees who perform better\n\nshould be compensated differently and at higher levels.\n\nThe length of time in service should not have a bearing on variable pay but unfortunately it often does.\n\nIn the past, executives often received a long term reward such as stock options. Today this is also common for the\n\nprofessional level employee with highly sought after technical skills.\n\nThis approach to paying employees links strategic business goals and employee performance. Rewards should be\n\ntied as closely as possible to desired performance, for example--for enhancing organizational results. The success\n\nof the variable pay plan might include increasing sales, operational efficiency, and/or employee morale, as well as\n\nlowering costs.\n\nThere must be a process in place to measure performance linked to variable pay. More than one variable should\n\nbe identified to measure performance. If a particular performance can't be measured, it should not be part of\n\nvariable pay program. The organization must be clear that it does not guarantee an increase for additional\n\ncompensation for merely working at the company and meeting basic objectives.\n\nVariable pay programs are complex and HRM must work with department managers and accounting to devising\n\ncorrect formulas to measure variable pay. The HR department must be able to clearly illustrate to managers how\n\nto manage and reward different types of performance. Managers must be able to clearly explain future\n\nperformance targets. And, devising variable pay measurement metrics is important.\n\nMore than 80% of Fortune 1000 firms use some form of performance-based compensation. Organizations\n\nfollowing the variable pay philosophy are typically more productive than those who follow the entitlement\n\nphilosophy.\n\nPay for performance is a concept embraced by many, but often executed poorly and ends up hurting morale,\n\nproduction, and retention. It must be properly executed.\n\nMuch can be learned from best-practice companies where base pay increases are truly earned based on\n\ndemonstrated individual achievement.\n\nVarying pay for performance produced can be a powerful driver of organizational change and success, with one\n\ncondition--it cannot be confused with traditional merit pay systems.\n\nHigh performers are attracted to companies that are committed to pay for performance. Low performers will selfselect out of these organizations.\n\nThe pay system should seek to change behavior and to move people forward in their careers.\n\nDecisions to implement a variable pay plan need to be well communicated so that employees realize that there\n\nwill be no merit pay for people who aren’t performing. This will reward top performers more effectively over time\n\nand retain the talent that is actually driving success."},{"left":"","right":""},{"left":"","right":""},{"left":"","right":""}]
Variable Pay Systems Major types of variable pay are bonuses, incentives, stock-options, and commissions. They are typically linked to performance of either the individual or the team
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Julien Payne
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