Variable Pay

Written by Patricia Skinner
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Some companies opt to adopt a variable pay scheme for their employees that will allow for the better performance or results of some key personnel to be rewarded accordingly. In many work environments, making provision for those who work harder, or who are more effective to be rewarded according to what they deserve will produce much better overall results. There are a number of different ways that this objective can be achieved. Let's take a look at the basic definitions of variable pay methods.

Enhanced compensation awards and incentive bonuses are the two main types of variable pay schemes commonly used. Enhanced compensation awards usually involve only part of a workforce. Typically, key employees who are considered to have contributed most to company growth or business improvement are included. Incentive bonuses may be directed towards the individual or towards a group or a team for their combined effort.

Less Common Methods of Variable Pay

Less frequently employed methods of variable pay include spot bonuses which are usually employed to reward specific, unexpected performance.

There is also the employee recognition award. This category can include service awards of various types and other incentives designed to raise the level of competitiveness among employees. Lots of businesses find that employing these strategies raises output and production considerably with very little investment.


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