This market rate serves as a reference to managers in determining the proper level of pay for individual employees. Base pay and variable pay together are called total cash compensation. Farmland's competitive level in the market place for pay is highest in those years in which company or unit performance leads to maximum levels of variable pay. Merit Increases Merit increases are based on an employee's level of performance, pay in relation to market rate, and the pay increase budget allotted to managers in any one fiscal year. Performance Appraisal Performance appraisal involves managers and employees jointly planning performance goals and standards and assessing actual achievement against those standards.
Achievement can exceed, meet, or fail to meet expectations.
While performance appraisal and merit pay are related processes, they are separate. Career progression, within or across job families or business units, is a key to the company successfully developing its human resources and being able to meet its business objectives. Variable Pay Variable pay, as was stated earlier, is an important element in Farmland's effort to be competitive in the market place at the level it wishes to be. Most employees are in non-sales variable pay plans which pay out annually if company or unit results are sufficiently high. Many employees occupy sales positions and may receive their variable pay in the form of quarterly or even monthly incentive payments based on mainly individual results.