Variable Pay

Описание: The term pay for performance is often used interchangeably with the term variable pay because this type of compensation moves pay from being a fixed cost to one that varies with employee performance. Variable pay is compensation that is tied to performance.

Incentives are tangible rewards that encourage or motivate action and therefore might be related to pay or be even broader. A pay for performance philosophy differs from a traditional entitlement compensation philosophy in which difference in length of service is often the primary differentiating factor. Variable pay plans are designed to motivate employees to invest discretionary effort - the extra, over and above minimum needed to avoid getting fired.

There is evidence that variable pay broadly available to most employees does improve company performance.However, not everyone wants to have their pay contingent on their performance.

Research has shown that intrinsic rewards, or rewards that are internal to the individual, are more powerful in motivating workers to exercise discretionary effort to achieve their own and the organization’s goals. Intrinsic rewards include meaningful work, autonomy, professional development, and opportunities to use their expertise.

Variable pay plans can be considered successful if they fit the organization’s objectives, culture, and financial resources.