Keeping a team engaged, productive, and achieving good results is a challenge for every manager today. To achieve this, it's necessary to implement management strategies that will motivate employees, and a great solution is variable compensation. This compensation is independent of fixed salary and consists of a reward for professionals who successfully complete their tasks or demonstrate performance that deserves recognition.

It can vary according to the performance of each employee, the team, or the company in general. Variable remuneration is generally linked to goals, and employee performance is measured over a certain period of time. Organizations have legal backing to reward employees in a way they deem most appropriate for their reality, as this type of remuneration is provided for in the Federal Constitution (Article 7, item XI).

If you understand that this can be a good option to motivate your company's employees, check out the 5 most common types of variable compensation in the market below!

Types of variable compensation

Among the main types available on the market, we highlight the following:

1- Commission

This is a well-known type, practiced especially by sales teams. Commission is a financial reward offered to employees for meeting previously defined goals or objectives.

The intention of this remuneration is to incentivize business intermediation and commercial results. It is worth noting that there is also a “cascading” commission, which is when a person receives a commission on the sales of other people on their team.

2- Profit and Results Sharing (PLR)

Regulated by Law 10.101/2000, this remuneration consists of a bonus given to employees as part of the profits obtained by the organization during a year or specific periods.

The PLR is exempt from labor and social security contributions and can be deducted as an operating expense. It is possible for there to be differences in amounts among company professionals, as long as it is within the remuneration plan's structure and includes all employees.

Also read: Variable remuneration: how to make payment?

3- Bonus

Many companies have opted to benefit their employees with prizes and incentives, as a way of recognizing professionals who distinguish themselves in some way in an activity or job.

This type of compensation doesn't necessarily occur in cash and can be, for example, a shopping voucher, a course, or a trip. Do you want to understand better difference between Bonus and PLRWe wrote another article about that.

4- Competency-based remuneration

For each position within the company, there is a standard salary. However, there is currently another type of remuneration based on a prior analysis of an employee's skill set.

The idea is to remunerate the professional for the qualifications they possess to perform a certain job with a superior level of performance. In other words, it is a way to guarantee recognition to the employee for their specialized contribution to the organization. Some examples of competencies that can be valued include leadership, interpersonal skills, fluency in another language, specializations, education (MBA, Doctorate, etc.), and technical mastery of tools and software.

5- Productivity Award

Unlike commission, which varies according to the goals achieved, productivity bonuses are generally given based on overall production, whether by a team or an individual professional. This type of compensation can be in the form of fixed amounts to be paid or have specific definitions previously established by the company.

The creation of a variable compensation policy can result in great advantages for the company, as it stimulates the effort for better results, both individually and collectively. In addition to reinforcing the organizational culture, the strategy serves to attract and retain talent, meaning it avoids a high turnover rate and favors cost and expense reduction.

Now that you know the 5 most common types of variable compensation, how about understanding the 5 most common mistakes companies make when controlling compensation using spreadsheets? We believe it will be very useful for you!