Variable pay is that part of the wage packet that is always at risk - individual bonuses, spot awards, team incentives and profit-sharing.
The report surveyed 300 schemes in more than 100 companies. It says variable pay systems are increasing in popularity and sophistication. Furthermore, such schemes improve performance and bring flexibility to pay rates, easing pressure on employers to lay people off whenever there is a temporary downturn in the market.
It says: 'Putting pay at risk may be a novel concept for many white- collar employees, but it was part of the life of shop-floor workers for generations through the many piecework systems that used to exist. So employee antipathy to 'at risk' pay might not be as strong as employers may think.'
Employers increasingly want flexibile pay schemes so they can deliver different objectives with payments that can go down if performance falls off.
One scheme said to be gaining popularity is the Inland Revenue approved cash profit-sharing scheme, which covers nearly one in 10 private sector employees. These give tax relief on an amount of pay linked to profit.
The report says: 'Employers said these schemes were effective in communicating business objectives, encouraging team work, boosting profits and reducing costs.'Reuse content