Variable incentive plan can help companies reward their employees effectively, this will also help in motivating the employees

1. A Motivation and Retention Tool
Variable Incentive
Plans

2. S
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An Introduction
Variable incentives did not work very well since most employees wanted
the security of a high base pay, and meeting targets was largely unpredictable.
Organizations want to curtail their fixed costs, hence salaries may not increase
dramatically and immediately, but variable incentive plans will help retain high-
performers and encourage achievement.
Most of us
On hearing the words
“Variable Incentives”
Reality
Sales Department
Applicable to all job roles in the
Organization, can be used to motivate
and retain employees

3. Who is Responsible for Attrition?
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Typically,
each employee may get 5 – 10 different goals which
determine their variable incentive plan for the year…
or in some cases, even a month, quarter or half-an-year.
Senior employees and those in management positions
would have significantly higher goals that may be linked
with the overall performance of the company or with
their respective departments
For middle management positions, the targets would be
based more on team performance and for junior
employees, the variable incentives will focus on
individual achievements

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Identifying High Performers
By giving multiple targets to each employee, there is a greater opportunity for
earning at least some part of the Variable Incentives.
This can act as a strong performance motivator and retention tool.
It also enables identification of
high performers who become
eligible to enter the succession
pipelines for key positions

5. Types of Variable Incentives
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Variable incentives can be broken down into multiple categories,
some of which are:
Performance
Based Targets
Individual
Targets
Evaluation
and
Recognition
Time Based
Negative
Indicators

6. o Can apply to employees of
specific departments
o For instance, if there are
employees from 2
different product lines,
each of them may have
different revenue and
profitability targets
o Can apply to all
employees, though with
varying weights
(Revenues and Profitability)
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Performance Based Targets
Each department in the company can have specific performance related goals,
such as:
Company Top Line and
Bottom Line
Departmental Goals

7. Individual Targets
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These are largely based on individual achievements and would constitute
0 – 20% for senior level employees and 40 – 80% for junior employees.
Some individual targets may include:
Individual Sales Performance
Production Performance
(such as number of pieces manufactured)
Project Renewals
Number of Persons Hired
(for recruitment department)
Training Imparted
(for training department)
and so on…

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Evaluation and Recognition
Appraisal Score
Goal Sheet Achievement Score
Client Recognition(s)
Nomination for Awards
External Events Conducted
While appraisal and goal sheet achievement could be counted as individual
targets, typically these are measured at a team level and we may see score
adjustments based on normalization, relative ranking etc.
Hence, these are under a separate category of evaluation and recognition.
Some of the targets in this category are:

9. Time Based
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Most companies want their employees to start work on time, take minimum leave,
attend regularly and manage their time effectively.
This can be encouraged by adding the following parameters
to their incentive plans:
1
2
3
4
Billable Hours
On-Time Entry
Average Weekly Hours Worked
Training Hours Undertaken

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Negative Indicators
To help avoid negative behavior, some companies include targets
which have a negative impact on the variable incentives.
Some of these could include:
Leave without pay
Late entry
Non-completion of assigned targets
Disciplinary incidents

11. Key Challenges in Implementation
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Collect Data
which can
help in
Calculating
Achievements
Communicate
the plans to
the Employees
Integrate
Variable
Incentives
Payout with
the Payroll
Software in a
Timely Manner
Calculate
Variable
Incentives for
a Large
Population of
Employees
Communicate
Payout to
Employees in
a Transparent
Manner

12. Thank You
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Pvt. Ltd.
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