Variable incentive plans a motivation and retention tool

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

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

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  • 1. A Motivation and Retention Tool Variable Incentive Plans
  • 2. S Copyright 2013 | Saigun Technologies Pvt. Ltd. 2 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? 3Copyright 2013 | Saigun Technologies Pvt. Ltd. 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
  • 4. Copyright 2013 | Saigun Technologies Pvt. Ltd. 4 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 5Copyright 2013 | Saigun Technologies Pvt. Ltd. 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) Copyright 2013 | Saigun Technologies Pvt. Ltd. 6 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 7Copyright 2013 | Saigun Technologies Pvt. Ltd. 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…
  • 8. Copyright 2013 | Saigun Technologies Pvt. Ltd. 8 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 9Copyright 2013 | Saigun Technologies Pvt. Ltd. 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
  • 10. Copyright 2013 | Saigun Technologies Pvt. Ltd. 10 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 11Copyright 2013 | Saigun Technologies Pvt. Ltd. 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 Copyright 2013 | Saigun Technologies Pvt. Ltd.