Variable pay has its ups and downs

Employers should not jump into rewards program without understanding caveats
By Esther Huberman
|Canadian HR Reporter|Last Updated: 05/06/2011

Employers should not jump into an incentive or rewards program without first understanding certain limitations and caveats and any potential financial impact, according to Steven Osiel, vice-president of total rewards at Pal Benefits in Toronto.

“Each organization must be aware that improved performance alone does not always result in a desired outcome. For example, any of the following challenge a company’s success, irrespective of employee performance: an economic downturn, competitor challenges, manufacturing changes and social evolution.”

For example, a salesperson may be rewarded for reaching a particular sales goal. But what if the raw ingredients required to build the company product increase in price? Or what if products are returned because of reduced customer demand?