Performance incentives through variable compensation components?

For some, it’s the icing on the base salary, for others, it’s a fixed but potentially significant component of variable compensation, which can represent up to 30% on top of the base salary. This does not refer to sales compensation models or individually negotiated top manager bonuses.

Variable compensation approaches are often debated in the workplace, especially in the context of non-standard or non-unionized positions:

  • What do we understand as fair and motivating variable salary components?
  • What self-responsible areas of work exist in different job families or teams?
  • At what level, degree, or hierarchical position does the variable component make sense considering the current organizational structure?
  • Which thresholds and evaluation criteria are applicable and transparent?
  • What proportion should be allocated to profit-sharing?
  • Does the applied model truly motivate employees, or does it foster “opaque inequality” or involve disproportionately high administrative effort?

If leaders want to promote employee performance through engagement and “good” work results, it makes sense to think more towards project-oriented, team-oriented, and departmental performance within the framework of New Work/New Pay development. The concept of “New Work” should be questioned in terms of assessable aspects. The newly added job contents, new work forms, and potentially evolved work organization cannot always be cleanly separated from long-established structures. An honest and self-critical analysis is recommended.

The differentiation of goals through ongoing evaluation should also not be overlooked. Sometimes, a goal becomes unnecessary! It should never be forgotten that employees want to have an individual or team influence on goal definition and achievement. Both observation and adjustment, taking into account the events that occur over time, are crucial.

By adhering to these principles, the variable compensation component becomes truly motivating and performance-enhancing!