Variable pay comes as a handy solution when companies aren’t sure about
increasing salary budgets
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Trends
in Variable Pay |
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According to the
Hewitt ‘US Salary Increase Study’, the common types of variable
pay plans include:
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Special
Recognition (55 percent): Acknowledge outstanding achievements
with small cash awards
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Business
Incentives (53 percent): Award employees for a combination of
financial and operational measures
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Individual
Performance (46 percent): Reward, based on specific employee
performance criteria
- Stock Ownership (41 percent):
Stock options to professionals who meet specific goals.
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According to Hewitt Associates, a global management consulting and
outsourcing firm specializing in human resource solutions, "Although
companies are experiencing unprecedented levels of uncertainty and need to be
fiscally prudent, they also realize that motivating and retaining their best
talent is critical to the company’s success."
Variable Way
The number of companies implementing variable compensation plans continues
to grow. (Variable compensation is a performance-related award that must be
re-earned each year and does not permanently increase base salary.) According to
Hewitt, 81 percent of surveyed organizations have at least one type of variable
pay plan in place, up from 78 percent in 2000 and 51 percent in 1991. However,
despite the growing popularity of variable pay, more than two-thirds (68
percent) of employers don’t know if these plans directly improve business
results.
"Traditionally, variable pay was used mainly as a reactive tool,
rewarding for performance and results that already occurred," Ken Abosch,
senior consultant at Hewitt says. "Today, it’s essential that companies
design these plans in a way that motivates employee behavior throughout the
year," Abosch adds.
Newstream.com
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