VARIABLE PAY PLAN 2
In the current world of business, variable pay plans are becoming more and more
popular as the preferred mode of compensation. Variable pay programs which are also, “pay
for performance” payment plans are used to award partial or sometimes full compensation for
the performance of employees as individuals or as a group. Those who propose the idea of
variable pay contend that rewarding employees or teams based on their performance will
motivate them to become more efficient and work harder in their activities. This paper seeks to
analyze the conditions that will favors a successful variable pay plan and discuss on whether
performance rewards for teams should be equal for all the members or whether it should be
individual performance based.
(Kalmi and Pendleton et al., 2012) Argue that it is essential to understand that different
business has different visions. Therefore, when employing a payment program, it is crucial to
consider its adaptability in the organization first. Companies have various performs which are
linked to their payment plans. The second factor to consider is whether the company is
rewarding the right actions. Knowing the company needs is a crucial factor. Different groups
have different needs which should be given more focus. For example, some companies have
excellent customer support teams, but their services are inadequate. Therefore, they end up
losing potential customers because they failed to set their priorities right. The last but not least
thing to put into consideration is understanding whether the variable pay plan is administered
correctly. In summary, the key factors that will contribute to a successful variable pay plan are:
using reasonable performance measures, linking the programs to the goals of the organization
and separately identifying incentives from the principal payments.
