Accelerated Variable Pay  

Compensation

Compensation design, its fulfillment and servicing is core to driving employees' performance & capabilities. An execution-focused compensation structure will reward both on goals & leadership. It will provide a reasonable differentiation across levels of performance. It will work on near-term to long-term retention and consistency of performance.


Accelerated Variable Pay


Accelerated variable pay is an essential requirement in sustaining the culture of progressive performance. In fact, variable pay should dominate the cost-to-company at senior levels.

Accelerated Variable Pay refers to the situation where the relative size of this component in the overall compensation increases with time or performance. This is can take two forms. In the first scenario, incentives can become proportionately higher as an employee achieves higher and higher levels of performance. These are referred to as slabs of payout where each slab is higher than the previous one. As the employee crosses pre-defined thresholds of performance, he/she become eligible to receive a higher percentage or proportionately higher variable payout. The other form can be that as the employee progresses higher up in the organizational hierarchy, more and more of the compensation package can comprise variable pay. Thus, as an employee gets promoted, a progressively higher percentage of the cost-to-company is made up of variable pay or incentives. Even within this variable component we can have accelerated payout structures based on slabs as discussed earlier. This is a very sensitive area and the HR department must design the variable pay policy carefully balancing the revenue dynamics and the resultant expected employee response in terms of organizational performance. In fact, the level of execution quotient in the employees can be increased or decreased to a large extent by the variable pay policy.