Variable Pay and Its Pros and Cons

Variable pay is a form of compensating employees depending on their performance. Unlike the salary which is compensated in equal proportions throughout the year, a variable plan is dynamic depending on an employee's achievement. In my organization with a variable pay plan, the basis for payment will be three-fold: the organizational set target, individual achievement, and personal needs. The variable pay will only be provided once an employee hits the set target. Employees will be awarded variable compensation once they exceed their job description to contribute to the success of an organization.

The individual achievement will also be another basis for incentivizing the variable pay. Organizational units such as departments are accountable for things they control.

However, employees will be provided variable pay depending on their individual achievement and not based on the department's results as this will lead to increased turnover. Lastly, the employees will be compensated based on their personal needs. Zall (2011) points that it is no longer adequate for an organization to provide similar generic benefits to all employees.

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The needs and preferences of employees are different, and they expect comprehensive benefits packages depending on their individual needs. Therefore, under the variable plan, the employees will be compensated based on their tastes and personal needs. A variable pay may not be common to every employee, and some may lack experience with the plan. Under such circumstances, the employees will be taught about the norms of the company, their required output, and the bonuses available when they meet or exceed the company expectations.

This is important as it will motivate them to attain and go beyond the set goals bearing in mind that their extra efforts will be rewarded.