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Variable Incentive Plan: A Motivation & Retention tool

Guest post by: Gireesh Sharma

Article Overview: This article explores the various categories of Incentives that can be applied to employees in different job roles and how HR can use this tool to motivate and retain employees across the entire company. Variable Incentive Plans are coming to the fore to retain high-performers and encourage achievement.

Variable Incentive Plan: A Motivation & Retention tool

April 6th, 2010: Since the past two years variable incentives did not work very well since most employees wanted the security of a high base-pay. The economy is on up-swing again and organizations & their employees see new opportunities for increasing their incomes.

Organizations want to curtail their fixed costs, hence salaries may not increase dramatically and immediately, but Variable Incentive Plans are coming to the fore to retain high-performers and encourage achievement.

As soon as we think of Variable Incentives, our thought goes to the employees in the sales department, but in my recent research I have found that each employee, irrespective of their department can be included in the Variable Incentive Plan. The goals, their relative importance and the expected achievements may vary across job roles.

Typically each employee may get 5 - 10 different targets which determine their Variable Incentive Plan for the year (or in some cases a month, quarter or half-year). Senior employees and those in the management positions would have a significantly higher weight for targets which are linked with the overall performance of the company or of 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.

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.

The rest of this article explores the various categories of Incentives that can be applied to employees in different job roles and how HR can use this tool to motivate and retain employees across the entire company.

Read the rest of this entry at my blog.

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Article Tags: incentive plans, motivation, retention tool, variable incentive



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