Variable Pay Plans and Incentive Pay Programs

Variable and incentive pay plans are performance based and continue to increase in popularity for employers that want to pay for performance.

Spending levels by organizations on variable pay has doubled over the past twenty years and this tool can be tailored to an organizations unique needs.

Why should I use variable pay or incentive pay?

  • More than 90% of organizations use variable or incentive pay to motivate, reward, attract and retain top talent, and to supplement base pay or other reward programs.
  • Performance measures can be tailored to those that drive organizational success and are typically based on sales, profit, operational, productivity or customer metrics.
  • Payment only occurs when defined goals or performance is achieved. There is no guarantee of payout under a variable pay plan.
  • The best variable pay plans are simple, and reward for the achievement of activities or results that can be measured based on specified goals. While pay is not the only motivator of performance, a good variable pay plan will help drive behaviors to levels of achievement that might not otherwise occur.
  • Variable pay plans can be individual or team based, and design is best determined by the nature of the roles within the organization and degree of accountability for the achievement of results.

What will my organization receive throughout this project?

  • Comprehensive Review: ERC will assess the effectiveness of any current variable pay or incentive pay programs by conducting a comprehensive review including an analysis of financial or other plan metrics, analysis of current and past plan payouts versus performance, and assessment of linkage between plan design and the achievement of plan objectives.
  • Stakeholder Interviews:strong>ERC’s process includes personal interviews with key stakeholders and a written assessment of findings and recommendations.
  • Comprehensive Analysis: Comprehensive analysis of financial or other metrics under consideration, and recommended alternative performance measures.
  • Variable Pay Program Design: Specific and best practice design of variable pay programs at all levels of the organization–from nonexempt through executive. Includes rationale, financial analysis, implementation requirements and recommendations.
  • Summary Plan: Detailed summary plan document including summary plan provisions, plan mechanics, definition of terms, examples, and often forgotten best practice legal and plan governance provisions.

Contact ERC to Get Started

Contact us about your interest in compensation and benefits consulting for your organization.