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Have you heard about variable compensation? You should know that it's one of the secrets to boosting productivity and employee engagement in a company. After all, when employees see the possibility of increasing their monthly earnings, they feel valued and motivated to deliver even better performance.

So, if you want to attract and retain talent, increase your team's performance, and ensure your employees are committed to the company, keep reading this article. 

But after all, what is variable compensation? 

Variable compensation is a strategy that goes beyond base salary and benefits, as it consists of amounts that can vary over a specific period. And best of all, these payments can occur monthly or a few times a year, offering continuous motivation to employees.

Furthermore, in variable compensation, salary increases are directly linked to the results achieved. This strategy provides considerable recognition to employees, serving as an incentive for them to meet goals and reach high levels of performance. As a result, team motivation is enhanced, generating a positive impact on all aspects of work.

What are the advantages of variable compensation? 

Variable compensation is a strategy that offers several benefits to companies that adopt it, such as the case of NC Group, which obtained a significant evolution in team results and engagement when using Actio software, the Actio Bonus Management. This approach allows for the sharing of success between the organization and employees, driving business growth remarkably.

In addition, there are several advantages associated with variable compensation, including the recognition and appreciation of employees' efforts, who feel like a fundamental part of the results achieved. This approach stimulates motivation, increases productivity, and strengthens employees' commitment to meeting and exceeding established goals, resulting in better overall organizational performance.

Engaged employees are more likely to stay with the company, fostering a positive employer brand and increasing talent attraction and retention. This reduces turnover, benefiting the work environment and strengthening the brand's reputation as a great place to work.

Check out the most common types of variable compensation 

Now that you know what variable compensation is and its main benefits, it's time to look at some examples! 

Bonus: 

The bonus is an additional amount granted to the employee as recognition for achieving goals, whether individual or collective. This bonus can be based on multiples of salary and calculated according to the performance achieved. Furthermore, bonuses can be distributed annually, semi-annually, quarterly, or even monthly, depending on the company's compensation policies.

Commission 

Sales commission is one of the most common forms of variable compensation in the market. It functions as a bonus for salespeople, incentivizing them to continuously increase sales volume. In this case, the employee receives an amount proportional to the total sales made in a specific period, usually monthly. In many businesses, a minimum sales amount must be reached to receive commission.

Profit Sharing (PLR)

 Profit Sharing is a program in which the company shares a portion of its profits with its employees. Profit Sharing must be accessible to all members of the organization and is established according to the conditions defined in a collective agreement. This form of variable remuneration allows employees to directly benefit from the company's positive financial performance.

Looking for variable compensation software? Get to know Actio Bonus Management! 

Financial awards 

Companies offer financial rewards as an incentive for teams to meet or exceed established goals for a given period. Generally, the organization grants these awards at the end of the year, after evaluating team results. They can be distributed to a team or individually, depending on the company's structure and policies.

Skills bonus: 

This form of variable compensation consists of a bonus offered to employees based on their skills and qualifications. For example, it is possible to grant a bonus to someone with a postgraduate degree and add the amounts according to the employees' level of education. This incentive is interesting for retaining employees in the company, promoting talent retention, and encouraging the continuous development of their skills.

What does the law say about variable remuneration? 

Variable remuneration is regulated in Brazil and is provided for in paragraph XI of art. 7 of the Federal Constitution. However, there are specific rules for the regulation of Profit and Results Sharing (PLR) established by Law No. 10.101/2000. This law establishes criteria that must be followed by companies, such as:

• Proportionality to results: The payment of variable remuneration must be made proportionally to the results achieved by employees and the company.
• No replacement or integration into salary: The profit-sharing bonus cannot replace or integrate employee salaries. It is an additional bonus based on performance and results.
• Negotiation between company and employees: The profit-sharing bonus (PLR) must be negotiated between the company and employees, through their legal representatives, such as unions or employee committees.
• Annual Goals and Results Program: An annual goals and results program must be established, defining the criteria for the distribution of variable compensation.

Step-by-step guide to implementing variable compensation 

1- Choose the type of variable compensation 

First of all, it is important to select the type of variable compensation that will be applied. Conduct a careful analysis to identify which model best suits the company's objectives and organizational culture, in order to achieve the desired results and stimulate employee motivation and performance.

2- Define the goals and evaluation criteria 

Establish the goals that employees must achieve to receive variable compensation, as well as the evaluation criteria. These goals can be quantitative, such as sales volume, or qualitative, such as customer service quality. Ensure that these goals are aligned with organizational objectives and are both realistic and challenging.

3- Communicate with the team 

The team must clearly and transparently communicate the implementation of variable compensation. Explain in detail how the system works, what the goals and evaluation criteria are, as well as the calculation and payment process. Be sure to answer all questions and provide practical examples for complete understanding.

4- Establish a tracking system 

Create an efficient system for tracking employee performance against established goals. This can include regular meetings, individual performance reports, or monitoring tools. Ensure everyone is aware of their progress toward their goals and offer additional support if needed.

5- Evaluate and adjust continuously 

Regularly monitor and evaluate the effectiveness of the variable compensation system. Analyze whether goals are being met and if employees are motivated. Make adjustments as necessary to ensure the system is fair, transparent, and encourages high performance.

Why invest in variable compensation with Actio Bonus Management? 

Technology can be a great ally when choosing the best variable compensation option for your company. Actio developed a unique software called Actio Bonus Management, which aims to ensure greater transparency in the disclosure of work goals achieved and the extra bonus each employee will receive.

With Actio Bonus Management, it's possible to have real-time access to individual results by area and by employee, which provides greater visibility and clarity in the variable compensation process. Furthermore, the software offers different methodologies, such as Scorecard, Action Tracking, Indicators and KPIs, Bonus per Employee and Area, among others. This allows you to choose the methodology that best suits your organization's specific needs.

So, if you are facing difficulties in applying any type of variable compensation, be sure to consider hiring Actio's software. 

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