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PCM: Total Compensation System (3) (Fixed VS Variable (Organisations have…
PCM: Total Compensation System (3)
Pros and Cons of each system
Fixed
Pros
Stability
Cons
Might deter employees if rates are not competitive
Overcompensation and undercompensation
Variable
Pros
Encourages Productivity
Retains workers in lean times
Cons
Puts pressure on customers
Competition between employees
Fixed VS Variable
Organisations have to mix both
EG:Fixed= Base Pay
EG: Base Salary+ Variable Commission
Factors affecting Variable Compensation
Internal
Job Requirement
Job Evaluation
Employees
Organisation’s strategy
Ability to Pay
External
Labour Market
Economy
Laws and Regulations
Inflation
Technological Changes
Academic Institutions
How to develop a compensation package
S.M.A.R.T
Analysed Throughly
Reward Results
Market Tough
Transformative
Strategy based
Objectivs