All you wanted to know regarding ***Variable Performance Pay***

All you wanted to know regarding ***Variable Performance Pay***

Variable Performance Pay aligns the focus of the employee with that of the enterprise. Thus, it encourages employees to support the organization’s strategic direction, and it drives the accomplishment of organizational goals. It does so by enabling companies to recognize and reward high performers and to sustain high performance.

Average performance is already compensated by the base pay at the market rate. Average performance doesn’t necessarily require a merit increase. Variable pay programs should pay for themselves. Though, it is not applicable to all positions.

Incentives are Crucial as they:

Ø  Add to bottom line profitability

Ø  Help control costs

Ø  Reward, retain, and motivates Performers

Ø  Motivates average performers to improve

Ø  Incentivize under performers to go elsewhere

Ø  Raise the bar for the entire organization

Trends

Ø  Short-term incentives are increasing as part of the rewards package

Ø  Promotional budgets are becoming separated from the salary budget

Ø  Employers are shifting funds to ensure that they are rewarding their top performers

Key to Success

Ø  Clearly defined Outcomes & Reward

Ø  Efficient Communications

Ø  Easy Metrics & Measurements

Ø  Appropriate & Substantial Reward