Economics/Business

Variable remuneration/advantages/disadvantages/types/implementation

Having a Variable Remuneration program is one of several strategies adopted by a company that wants to stand out in the market. After all, they want their people management to become more efficient. 

However, for this program to be applied efficiently, it is important that companies really know its concept. Because, instead of benefits, it can bring disadvantages when it is not well organized. 

In order for you to better understand the topic, let’s talk about all the points of variable remuneration. We put together a very complete material. So come with us? Good reading!

After all, what is variable remuneration?

Many professionals confuse variable remuneration with salary , but this is a program regardless of the amount that is paid monthly to an employee. After all, in addition to the payment, a bonus, prize, incentives or other types of financial advantages can be added to the value of the professional. 

Therefore, variable remuneration can be defined as a set of benefits that complement a salary . After all, it allows a talented employee to have an extra financial amount at the end of the month. This is achieved based on your performance in activities or campaigns that are pre-aligned. 

A variable compensation program involves several types of benefits for the professional. Like:

  • Commission;
  • Book participation;
  • Award for hitting the goal;
  • Bonus granted by the company.

However, these benefits cannot be offered randomly, but based on the organizational culture of the company .

That’s because this program is part of a powerful strategy to motivate people. It is commonly used in the world’s largest and most successful institutions. But it can and should also be applied in your business to enhance your human capital .

What are the advantages and disadvantages of the variable compensation program?

Was the concept of variable remuneration clear to you? Now that you understand this part, surely you want to know what the benefits are for your company, don’t you?

But remember that, like any strategy, this one also has its risks. So, we’ve listed the points for you to review.

Benefits:

  • Employees feel more motivated and, therefore, strive to have the best results;
  • It helps in developing a culture of meritocracy;
  • This program helps to strengthen a company’s vision, mission and values;
  • It is a positive way to reduce fixed costs;
  • Strengthens organizational culture ;
  • Improves the company’s image with its employees and competitors.

Disadvantages:

  • If the program is not well defined, it can be something that demotivates your team;
  • There is a possibility of generating negative results if not well planned.

In a general view, the variable compensation program, when well structured, helps to implement an excellent personnel performance . In addition, it helps in retaining talent , but also in attracting good professionals. 

Main types of variable remuneration 

As we said at the beginning, there are different ways to have variable remuneration within a company. It can be used according to the activity in question or the type of goal you want to achieve. 

We list below the most used types in the job market. Meet:

Profit sharing and results (PLR)

This benefit was regulated by law 10.101/2000. This type of variable remuneration is a form of bonus that is granted to employees. The organization shares the profits achieved within a given period with the entire team. 

It is important to emphasize that the PLR ​​does not have labor or social security contributions, allowing it to be deducted as an operating expense. Another thing that is worth mentioning is that the amounts paid to employees may be different, but this needs to be well clarified in a document, according to the company’s remuneration architecture and that all professionals are aware. 

Bonus 

Organizations that decide to tone up their employees with rewards and incentives. After all, it’s a way to recognize those who excel at performing their tasks. 

However, the bonus does not necessarily have to be cash . Therefore, there are other ways to reward a collaborator, for example:

  • Gift card;
  • Course in your area of ​​expertise;
  • Trip;
  • Day Off.

Incentive campaign 

This type of variable remuneration has a start and end date that are previously established by the company. Therefore, the entire team is aware of when a campaign starts and ends. 

It is a type of marketing action, but aimed at its internal audience, the employees. Therefore, it is called endomarketing and its objective is to create incentives for an entire team.

When the goal is reached, there is a reward for those who excel in results. 

The differential of this type of variable remuneration is its date, which needs to be well defined. It is recommended to use commemorative periods such as Easter, Christmas or Carnival.

sales commission 

This action is popular among the sales force. It is a financial incentive offered to those who meet their sales targets, which are pre-established by managers. 

The objective is to motivate the sales team to make profitable deals, increasing their results. 

Compensation for productivity 

We can say that this type of variable remuneration is established based on the general production of a company. However, it can be defined for a team or for an individual professional.

It can be done with fixed values ​​or defined according to company conditions. 

Are there regulations to implement variable remuneration?

When a company decides to implement variable remuneration, it is necessary that it observe some issues. After all, this benefit is provided for in the Federal Constitution, in item XI of art.7, for more than 50 years.

We emphasize that this regulation determines that these types of programs never exist in order to generate fixed remuneration. Therefore, it is important to encourage this negotiation in strategic periods.

How to implement variable compensation?

To be successful a variable compensation program needs to follow a few steps. After all, they help in its correct application. Are they:

Definition of indicators 

It’s important to create evaluation metrics to track your employees’ performance. Using indicators (KPIs) helps you verify that strategic objectives are being met. They are usually related to a sector or employee’s task.

Therefore, define which indicators will accompany your results. However, keep in mind that the chosen metrics must be very clear and directly linked to the professional’s performance scope.

Determine the criteria and goals 

After defining the metrics, establish some measures so that the variable remuneration program works properly. For example:

  • What is the value of the variable remuneration;
  • Campaign period, if this is the one chosen;
  • Minimum and maximum amount of the amount;
  • Determine premium according to salary percentage;
  • Who can participate.

Ideally, everyone participates. However, using criteria such as the absenteeism rate to see who can participate in the variable compensation program can be a good solution.

Monitoring of program execution 

Periodically monitor the implementation of variable compensation. For this, prepare reports with data, numbers of indicators and metrics. This is essential to know if your program is working as planned.

In order for you to have financial data as well, the project needs to collect and calculate the Return on Investment (ROI) of everything that was applied in this project. After all, you will see if this benefit is giving the financial return that the company expects.

Why is it important to use this type of compensation in companies?

Having a Variable Compensation program within a company will directly impact employees. After all, it will show managers how they feel about their work at the company, as they will feel recognized. 

However, it is an excellent way to foster the organizational culture and enhance its values. Plus, it’s a smart way to save and retain the best talent .

Therefore, it is important to have this program being applied from time to time, as it helps the company to:

  • Decrease the turnover of professionals,
  • Raise the quality of your company’s production;
  • Increases employee recognition. 

Therefore, having a good variable compensation program is essential for the company’s growth. After all, she manages to reach her goals and reach her goals. That’s because your team will be motivated to give their best.

We also emphasize that variable remuneration increases the company’s strength, reinforces the importance of everyone’s participation as a team and improves the organizational climate . After all, bonuses encourage good results.

This type of program makes the employee feel that he belongs, that is, that he is part of the success of the organization where he works. 

Setting up a variable compensation program is not difficult, but it does require attention to detail. Furthermore, it is important that these benefits are in accordance with the company’s organizational culture, so as not to run away from what it really wants.

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