LO6

• objectives of variable pay


  1. to improve business performance through efficient and productive employee behaviour
  2. to keep compensation competitive
  3. to enhance employee recruitment, engagement, retention, and employer branding
• Variable Pay​


  Incentives link pay to performance or productivity for part of or all income
• Variable Pay


  it can incorporate the performance of individuals, groups, business units, and corporate financial

  and stock price performances.
• Variable pay


  provide the clearest link between pay and

  performance or productivity
• Performance


  accomplishment of assigned tasks
• productivity


  measure of output
• Incentive pay


  offered through variable pay systems is directly linked to an employee’s performance or productivity.
• FINANCIAL INCENTIVES


  Unlike raises and promotions, the reinforcement is generally quick and frequent—usually with each

  paycheque.
• VARIABLE PAY

  • Individual Incentive Plans
  • Team (or group) incentive plans
  • Profit-sharing and ownership plans​
• Individual Incentive Plans


  • Piecework​
  • Production bonuses​
  • Commissions​
  • Discretionary bonuses​
  • Spot awards
• Piecework


  incentive system that compensates the worker for each unit of output.
• Production bonuses


  incentives paid to workers for exceeding a specified level of output.
• Commissions


  commonly paid in sales jobs.
• Discretionary Bonus Plans


  employees are paid base wages and then

  are paid a bonus at the discretion of management.
• Spot Awards


  recognize special contributions as they occur.
• Spot awards


  These types of recognition awards can range from gift certificates and thank-you notes to paid time off to cash awards or salary increments unrelated to annual merit increases.
• Team (or Group) Incentive Plans


  Several plans have been developed to provide incentives based on the performance of a group or work team
• Team Results


  employee bonuses and salary increases are

  based on a team’s overall results and typically shared equally
• Production Incentive Plans


  allow groups of workers to receive bonuses for

  exceeding predetermined levels of output
• Profit-Sharing Plans


  shares company profits with the workers
• Employee Stock Ownership Plans (ESOPs)


  have become very popular in North America and Europe.
• Benefits of Incentive Systems


  Performance is reinforced regularly​

  Reinforcement is quick and frequent​

  Desired behaviours are likely to continue​

  Wages paid in proportion with performance​

  ​
• Problems​ of Incentive Systems


  • Administration can be complex​
  • May result in inequities ​
  • Employees may not achieve standards due to uncontrollable forces​
  • Union resistance​
  • Employees may focus on only one aspect