Discuss about the Variable Pay for Variable Work.
Wisdom behind variable pays for variable works:
The management of companies like RS2 Software PLc, Malta enforce variable payment structures for variable work areas but do not necessarily implement the system for all the departments. This is because different departments in an organisation fulfil different responsibilities and as a result come under different levels of professional pressures. The management bodies use variable pay as an effective way for motivating people to perform better which also means taking up more pressure. For example, the sales department plays the tremendously important role of selling products and earning revenue (rs2.com 2018). They are under continuous pressure to sell more products to generate higher revenue. This mounting stress often results in diminishing motivation which requires the management to implement motivation-enhancement measures. Thus variable pay structures enable the sales force to earn higher compensations in form of incentives. These factors boost their motivation and urge them to achieve higher sales target. However, departments like administration are involved in internal operations of companies and do not come under direct impact of the market. Thus, they require less motivation compared to the sales departments to achieve high performances. These differences of work pressure acting on different departments necessitate the management bodies to decide different types of pay packages to motivate them (Bennett et al. 2017). Thus, it can be reinstated once again, that it is a prudent management decision to offer variable pay packages to different job roles to motivate them.
Factors behind variable pays for variable works:
The following are the factors which impact the variable payments for variable works in the organisations:
The performance parameters of different teams constitute the first factor which decides the application of variable payment system. The roles, responsibilities, work pressure and motivation level required to counteract it play significant roles in deciding the application of variable pay programmes. As pointed out, the sales team experience high job pressure to achieve their targets and require higher motivation. The employers thus, use variable pay programme to motivate the sales personnel which is absent in case of back-office departments like administration department since they experience almost no external pressure and consequently, need lesser motivation (Cooper, Gulen and Rau 2016).
Seniority and potential:
The level of seniority and potential are important factors determining the application of variable payment system. For example, the senior sales managers of RS2 Software have the potential to handle larger teams compared to junior managers. As a result, they come under more professional pressure to over-achieve their targets and require more motivation to handle it. Thus, the company pays these senior managers more incentives than junior managers (Deysel and Kruger 2015). Thus, seniority and potential forms important factors while deciding the variable payment systems in business organisations.
Thus, it can be concluded that variable pay system has emerged as a new motivating tool to motivate employees who work under excess tress. This helps employers to motivate these employees to over achieve their targets. This high employee performance ultimately translates into the high performances of the business organisations thus enabling them to earn high revenue.
Bennett, B., Bettis, J.C., Gopalan, R. and Milbourn, T., 2017. Compensation goals and firm performance. Journal of Financial Economics, 124(2), pp.307-330.
Cooper, M., Gulen, H. and Rau, P.R., 2016. Performance for pay? The relation between CEO incentive compensation and future stock price performance.
Deysel, B. and Kruger, J., 2015. The relationship between South African CEO compensation and company performance in the banking industry. Southern African Business Review, 19(1), pp.137-169.
rs2.com. 2018. Contact Us. [online] Available at: https://ps://www.rs2.com/contact-us/ [Accessed 2 Feb. 2018].