Designed to stimulate employees to pursue goals, the compensation variable It can be a solution to improve your team’s performance. However, not all companies achieve good results with this compensation strategy. Read on and find out how to implement it in your organization.
The variable remuneration is performance-related
According to HR specialist Susan Heathfield in an article published on the portal about.comvariable remuneration is commonplace recognize and reward to employees whose contributions significantly improve the company’s productivity, profitability, quality or safety, among other metrics that may be deemed important.
So it is one monthly salary allowance. The criteria for granting this bonus vary from company to company, but in general the beneficiary must perform better than expected and make a significant contribution to the company’s success.
There are different types of variable remuneration. Among the most important ones can highlight:
- Profit and profit sharing.
Convert fixed costs to variable
In addition, to stimulate and retain employees in their search for results the business of the company By creating a solid organizational culture, variable compensation has the function of reducing the company’s fixed costs.
Because part of an employee’s remuneration is related to his or her performance, there are variable costs This depends on the results of the company.. The same cost logic is with merchandise, for example: for that expense to increase, demand must increase, which generates results for the business.
Therefore, one of the great challenges of the entrepreneur, especially of small and medium-sized enterprises, is to reduce fixed costs and stimulate variable costs. This technology enables sustainability economically the company.
How to introduce variable compensation
Before creating a variable pay plan, you need to understand the details which factors influence in the success of the company. For this reason it is necessary to guarantee indicators capable of measuring these conditions. The task may be easier in retail, where seller performance is measured by quantity sold, and more difficult in IT, for example.
For this reason, some companies rely on variable compensation and are not successful with it. In order for the system to work, the plan must be compatible with the corporate culture. For example, if your employees have never been inspired to achieve goals and work with specific numbers, it may not make sense to start now.
In addition, it is important that the remuneration system is variable easy to understand by the team so that there are no doubts about the process and nobody feels cheated. Transparency in all decisions is also essential during this time.
Finally, it is worth remembering that you need to analyze direct competition to understand how they deal with compensation. This is the only alternative to ensure your company practices a values and rewards plan market compatible. If you don’t know how to do this, it may be time to consult your trusted tax advisor or a specialist advisor on the matter.