COMMERCE 2BC3 Chapter Notes -Standard Streams, Restricted Stock, Phantom Stock
30 Apr 2012
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Variable pay: compensation linked directly to individual, group/team, and/or organizational performance. Includes incentives, bonuses, gainsharing, and goal plans and is any form of direct pay that is not folded into base pay. Attempt to provide tangible rewards to employees for performance beyond normal expectations. Some jobs contribute more to organizational success than others. Some people perform better and are more productive than others. Employees who perform better should receive more compensation. Some of employees" total compensation should be tied directly to performance and results. Differences in job responsibilities are recognized through different amounts of base pay. Unions are opposed because of the belief that it will lead to a reduction in base pay. Study reported that 30% of unionized workplaces have variable pay plans that are used as a bonus to an employee"s base salary. Incentive programs vary from employer to employer. Employers adopt variable pay or incentive plans for a number of reasons:
