Variable Pay in Organizations

Types of Variable Pay:

—  Piece-Rate Pay

—  Merit-Based Pay

—  Bonuses

—  Skill-Based Pay

—  Profit-Sharing Plans

—  Gain-sharing

—  Personalised variable pay

—  ESOPs

Benefits of variable pay:

—  Innovative, productive, and efficient

—  To align individual motivation and goals with the objectives of the organization

—  Psychological theories suggest that incentive pay motivates performance

—  Risk shared with employees

—  The idea of creating a culture of ownership

—  Lesser turnover

—  Eliminate weak links, reward performers

What the organization needs to decide upon?

·        Eligibility

·        Defining measures

·        Developing a reward formula

·        Developing distribution criteria

·        Frequency of payment