Establishing stronger connection between individual employee's result and salary on one end, and company's earnings on the other, through stimulating high performance and destimulating low performance
Variable salary is a part of employee's compensation and benefits package that changes throuought the year, in relation to employee's performance indicators
Variable salary is mostly used as tool for recognition and awarding of individual employee's contribution to company's success, in a certain period of time
Variable salary implies different kinds of compensations and benefits for successful employees, such as: money, goods, services, etc.
Key differences that separate variable salary system from bonus are two relatively connected categories: time and motivational effect
Compensation for employee's overall contribution to company's success, payed half-yearly, yearly or in longer period of time, is defined as bonus
Compensation for employee's contribution to company's success close to, and directly connected to individual goals achievement is defined as variable salary
Four main conditions need to be fullfilled to successfuly implement variable salary system
Payment and reporting frequency up to 3 months period is considered as variable salary. We recomend to use monthly frequency as best pratice
To implement variable salary system, company must be able to produce every employee's individual results, based on personal goals, accurate and on time
Payroll accounting must be able to calculate variable salary accurately and on time for each employee, according to individual goals
Managers on all levels must take new responsibilites for establishment, correction and realisation of all goals in new variable salary system
MONTHS MAX. PERIOD
MONTH RECOMMENDATION
BEST PRACTICE
TECH SUPPORT
To streghten company-employee bonds, to differentiate over- and underachievers, best place to start is sales department
Establishing stronger connection between individual employee's result and salary on one end, and company's earnings on the other, through stimulating high performance and destimulating low performance
Sales results increase on company level Differentiate over- and underachievers Facing underachievements Nursing high pervormance culture Precise overall salary costs control
Sales teams have greatest impact on company's financial results Variable salary system makes unsupervised sales teams to produce good results Sales teams results are accurately measurable
Salary model management tool, performance management tool, business reporting and results tracking, employee's salary calculator
Practical implementation of this variable salary model brings the following...
A) MODEL IS:
Fair and (psychologically) accepted by all concerned parties Very simple and comprehensive Legally straightforward and ellegant Easy to administrate
B) MODEL FULFILLS SET STRATEGIC GOALS: If planned goals are not achieved, system enables timely identification of problems and shifts in sales strategy Keeps overal salary costs under control (costs increase is justified by results) Clearly differentiates over- and underachievers Moderately punishes underachievement (long term low performance is not a model flaw, but people management problem!) It's extremely stimulative (drives employees to high performance - for results over 100%, generously rewards employees success)
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APLIKATA LLC