Salaries will increase by about 4.4 percent nationwide this year, according to Hewitt Associates, a management consultant firm that surveyed 856 companies from Fortune's 1000 list. Hewitt predicts this trend will continue next year as well. But if you're not sure you can afford even a moderate raise in salaries, there is another option - variable compensation.
Variable compensation refers to employee rewards that are based on performance.
Fast becoming a buzzword, variable compensation includes special recognition awards like cash, gift certificates, or stock ownership for individuals or groups that meet specific performance goals. Gone are the days when only executives would be eligible for such performance awards. Now it's critical for employees of all organization levels to be eligible for these same rewards in order to promote retention. Variable compensation has been described as a 'win-win' situation because it creates no fixed costs for businesses. It merely rewards specific business, individuals, or group goals - and it excites employees because pay can increase dramatically when goals are met.