Making Variable Pay Work for Your Organization
Variable pay is a powerful tool for attracting, engaging, and retaining employees but designing the right plan starts with understanding your business goals and identifying the roles that drive performance.
A Short-Term Incentive (STI) plan can help companies balance costs by shifting fixed compensation to performance-based rewards. Since payouts depend on results, these plans give companies financial flexibility while motivating employees to align their work with company objectives.
Who Should Be in Your STI Plan?
To decide which employees should be included, start by identifying roles that have a direct impact on business performance. These roles are typically grouped by:
- Job Level – Executives, managers, and key professionals.
- Job Family – Departments or functions critical to success.
- Specific Roles – High-impact positions tied to business goals.
Each group should be assessed based on its ability to:
✔ Influence key performance measures.
✔ Align work with business objectives.
✔ Prioritize the right activities to drive success.
Affordability & Implementation
Once you’ve identified eligible employees, the next step is to ensure that the plan is financially sustainable.
- Set Variable Pay Targets – Use affordable compensation data that incorporates trusted market data to determine appropriate pay levels for each job.
- Define Performance Goals – Establish clear, measurable targets that align with company strategy.
- Plan for Funding – Whether self-funded or budgeted, STI payouts should be tied to financial performance.
- Customize Payouts – Create payout models that balance investment, risk, and financial impact.
Other Key Considerations
- Clear Eligibility Rules – Outline and document who qualifies, how payouts work, and what happens with new hires, performance issues, or terminations.
- Performance Standards – Make sure that only employees meeting expectations receive full payouts.
- Plan Participation – Employees should be enrolled in only one variable pay plan to maintain consistency.
Design a High-Impact STI Plan with The Comp Consultants
The right STI plan motivates employees, aligns with business goals, and fits your budget. The Comp Consultants provide affordable, data-backed insights to help you design competitive incentive plans using trusted survey sources.
Ready to optimize your incentive strategy? Let’s build a plan that works for your business. Reach out to The Comp Consultants today at [email protected] 🚀