Variable incentive plans a motivation and retention tool
A Motivation and Retention Tool
Copyright 2013 | Saigun Technologies Pvt. Ltd. 2
Variable incentives did not work very well since most employees wanted
the security of a high base pay, and meeting targets was largely unpredictable.
Organizations want to curtail their fixed costs, hence salaries may not increase
dramatically and immediately, but variable incentive plans will help retain high-
performers and encourage achievement.
Most of us
On hearing the words
Applicable to all job roles in the
Organization, can be used to motivate
and retain employees
Who is Responsible for Attrition?
3Copyright 2013 | Saigun Technologies Pvt. Ltd.
each employee may get 5 – 10 different goals which
determine their variable incentive plan for the year…
or in some cases, even a month, quarter or half-an-year.
Senior employees and those in management positions
would have significantly higher goals that may be linked
with the overall performance of the company or with
their respective departments
For middle management positions, the targets would be
based more on team performance and for junior
employees, the variable incentives will focus on
Copyright 2013 | Saigun Technologies Pvt. Ltd. 4
Identifying High Performers
By giving multiple targets to each employee, there is a greater opportunity for
earning at least some part of the Variable Incentives.
This can act as a strong performance motivator and retention tool.
It also enables identification of
high performers who become
eligible to enter the succession
pipelines for key positions
Types of Variable Incentives
5Copyright 2013 | Saigun Technologies Pvt. Ltd.
Variable incentives can be broken down into multiple categories,
some of which are:
o Can apply to employees of
o For instance, if there are
employees from 2
different product lines,
each of them may have
different revenue and
o Can apply to all
employees, though with
(Revenues and Profitability)
Copyright 2013 | Saigun Technologies Pvt. Ltd. 6
Performance Based Targets
Each department in the company can have specific performance related goals,
Company Top Line and
7Copyright 2013 | Saigun Technologies Pvt. Ltd.
These are largely based on individual achievements and would constitute
0 – 20% for senior level employees and 40 – 80% for junior employees.
Some individual targets may include:
Individual Sales Performance
(such as number of pieces manufactured)
Number of Persons Hired
(for recruitment department)
(for training department)
and so on…
Copyright 2013 | Saigun Technologies Pvt. Ltd. 8
Evaluation and Recognition
Goal Sheet Achievement Score
Nomination for Awards
External Events Conducted
While appraisal and goal sheet achievement could be counted as individual
targets, typically these are measured at a team level and we may see score
adjustments based on normalization, relative ranking etc.
Hence, these are under a separate category of evaluation and recognition.
Some of the targets in this category are:
9Copyright 2013 | Saigun Technologies Pvt. Ltd.
Most companies want their employees to start work on time, take minimum leave,
attend regularly and manage their time effectively.
This can be encouraged by adding the following parameters
to their incentive plans:
Average Weekly Hours Worked
Training Hours Undertaken
Copyright 2013 | Saigun Technologies Pvt. Ltd. 10
To help avoid negative behavior, some companies include targets
which have a negative impact on the variable incentives.
Some of these could include:
Leave without pay
Non-completion of assigned targets
Key Challenges in Implementation
11Copyright 2013 | Saigun Technologies Pvt. Ltd.
the plans to
Software in a