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The Latest Trends in Variable Pay

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6 Individual performance plans are also seeing resurgence in popularity primarily due to the likely continued uninspiring salary increase budgets. Companies who do not have or do not desire to have plans that measure aspects of organizational performance favor this design type. It is relatively simple to create (based on individual goals) and execute since this ties into the annual performance review process. The primary hurdle to overcome with this design type is the degree of discretion that exists in determining performance results and how that translates to a bonus payout. Plan Eligibility Broad-based variable pay plans have undergone a tremendous change, but more progress is needed. While the number of U.S. companies who have added broad-based variable pay arrangements has grown at an astronomical rate to more than 90%, the depth of participation in these organizations has not progressed as rapidly. Twenty years ago, the median base salary level of the lowest eligible employee in these plans was $49,000; today, that salary level has dropped to $33,000. This would suggest that variable pay eligibility has been pushed down deeper into organizations. Looking more carefully at different employee segments reveals a huge disparity in the participation levels for salaried nonexempt and nonunion hourly employees. This trend is disappointing for a number of reasons. It is critical that this segment of the workforce be as aligned as possible with the understanding and pursuit of the organization's goals and desired results. Having such a large segment of the population disconnected from a collective interest in achievement and rewards could result in sub- optimal performance. It should also be recognized that the accomplishment of company goals is not possible without the efforts of the entire employee population. Otherwise, there exists a potential for a "have and have not" scenario where only some employees benefit from the efforts of others. In some industries the entry-level workforce is the long-term talent pool for creating future managerial talent. Disenfranchisement of this group could be detrimental.

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