The Manager’s Guide to Rewards: What You Need to Know to Get the Best for—and from—Your Employees

Chapter 8. Reinforcing Results with Variable Pay

MANY PEOPLE TODAY working in jobs below the executive level have an opportunity to supplement their base salary by earning an incentive or a bonus. Although the size of this additional compensation, which we call variable pay, is usually much less than a person’s salary, its ability to influence behavior can be significant—if a manager knows how to use it. Variable pay comes in many different forms, but they have one thing in common: The amount of money varies.

Types of Variable Pay Programs

This chapter addresses many forms of variable pay, but first let’s get the terminology and exceptions out of the way.

The Difference Between Bonuses and Incentives

It’s important to clarify the difference between ...