The different types of variable pay programs are described below in about 500 words along with advantages and disadvantages with a reference at the end.
Merit Pay, the focus of that approach is on performance, as measured through performance appraisal. A second and much older concept is that of the incentive pay plan. The focus in this case is on the motivational content, that of obtaining more effort from the employee. A third term used is that of payment for results. This is defined as: "a payment system under which money rewards vary with measured changes in performance according to predetermined rules."1 This type of compensation program makes the basic assumption that employees are interested in money and are willing to put forth more effort for more money. The important word in the above quotation is that of "vary." These types of plans vary the compensation ...
The solution highlights variable pay programs that are used to motivate employees as well as their inherent advantages and disadvantages.