Question

Variable Pay is compensation that is tied to performance. Incentives are tangible rewards that encourage or motivate action.

Why do you think variable pay plans have become so popular? Why might gift certificates be a better incentive than providing cash/additional pay to employees?

Answer 1

Variable Pay

Variable Pay in the form of compensation to the employee for the achievement of the specific business target. It is not fixed for every month for the employee it depends on the month on month performance of the employee. If an employee is able to maintain their standard and achieve the business target, they would definitely get variable pay for their work and contribution to the Organization. Example: Incentive to Sales Team, Bonus, commission on sales target, etc.

Variable Pay & Fied Pay

Basis	Variable Pay	Fixed Pay
Meaning	Additional pay to employee linked to their performance	Normal Pay to every Employee.
Motivate	It motivates the employee.	It doesn't motivate the employee because every getting this.
Pay	The reward for achievement of Specific Target.	Pay for the day to day activity of the Business.
Nature	It changes with the change in the performance of the employee.	it doesn't change with change in the performance of the employee.
Example	Bonus, Incentive & Commission	Salary and Wages.

With the help of the Above Comparison, we understand that the variable pay only pays to that employee who achieves their business target and it doesn't permanent income for the employee. It's depending on the performance of the employee. Its also helps to motivate the employee and improve their productivity with positive way. Variable pay is tangible in nature because we can see the variable pay(Bonus, Incentive, and Commission). Variable Pay, develop the Competition in the Business.

Variable pay plans have become so popular

Variable Pay Plan plan become so popular in Today's world and now every organization using this payment system to improve Business Productivity. It also helps to retain and motivate the employee. There are lots of points which help us to understand why Variable Pay become popular.

Reason of Popularity of Variable Pay

• Variable Pay linked with employee Performance
• variable Pay not permanent in nature.
• Variable Pay are Tangible Rewards to the Employee
• Variable Pay help in achieve Business Goals
• variable Pay improve the performance of the employee
• Variable Pay motivates the employee for achieving daily targets.

Gift certificates be a better incentive than providing cash/additional pay to employees

Gift and Certificate are may be a better option for motivating the employee. Because it doesn't affect the financial position of the company. The needs of every employee are different. Like Top Management can be motivated by giving certificates and gifts, but for the workforce and lowe level employees, there is no importance of any certificate and gift box. Labour Class can be motivated only through Cash and Additional Pay to an employee for the betterment of the employee's survival and its life Style.