CompLogix Blog

Variable Pay Programs and Compensation Management

One of the more interesting types of employee compensation is the variable pay program. According to a 2012 report by World at Work, 84% of respondents indicated that their organization uses variable pay (up from 80% in 2010). When you stop to think about some of the benefits, it becomes apparent why. Variable pay incentivizes employees, motivating them to work harder and improve their performance within the organization. Since their compensation is directly tied to their performance and the benefits they bring to the organization, they can take more ownership of their compensation by working harder to receive the desired incentives. Variable pay means that increases aren’t permanent and based solely off of the length one has spent at an organization. And since the only way to receive these increases is to maintain a high level of performance, employees can’t simply rest on their laurels and allow their productivity to stagnate.

While the associated benefits make variable pay attractive in theory, putting it into practice proves an entirely different story altogether. Since variable pay programs typically incorporate a number of different aspects, they can be tedious and time-consuming when it comes time to plan and administer employee compensation. Variable pay programs typically include bonuses, stocks, spot awards, performance/profit sharing, and other elements which can make them difficult to tally up during the compensation planning period.

Planning variable pay programs in a spreadsheet, especially if an organization has multiple employees in a variable pay situation, goes beyond being merely difficult. Organizing salary data from disparate divisions can already be a time-consuming and labor-intensive process, especially if it means waiting on managers to provide you with the relevant data to complete the planning process. Having to keep track of all the different incentives an employee may be eligible for (relative to their performance, however an organization keeps track of that) can quickly devlove into an exercise in pure frustration.

Such a complex problem requires an equally robust solution. A powerful compensation management solution can take the brunt of the grunt work off of the shoulders of the HR or Comp department, allowing your organization to enjoy the full benefits of a variable pay program with none of the hardship. The right tool can integrate with your pre-existing performance management system, allowing users to see what incentives an employee is eligible for based off of their performance. Moreover, it can keep track of the various elements of the variable pay program in an organized manner, going so far as to allow generation of a Payroll or Total Rewards statement so the employee knows the full extent of their compensation.

If you’re one of the many organizations which utilizes a variable pay program and are having issues when it comes time to plan compensation, perhaps its time to consider a compensation management tool. At Harvest, we offer solutions developed and customized specifically for each organization’s unique requirements. We also offer top-notch customer service to ensure our clients get the most out of the systems we provide. If you’d like more information, first see whether or not a compensation management tool is the right choice for your organization. If you have questions, or would like to inquire further about the solutions we offer, feel free to contact us.

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