Variable Compensation Programs and its different perspectives

Posted by Marcos Tadeu
at Tuesday May 23rd, 2017.

Variable compensation. Over the last decade many executives have benefited from the change in the way the companies compensate its managers, directors and presidents. The variable compensation concept that, for decades, was connected to the minimum wage is no longer attached to the companies need of different sizes and sectors. Into this new process people are struggling to give better results, because part of it will be reverted into benefits. But what are the most popular types of variable compensation in Brazil?

This kind of compensation represents the recognition not only for the work, but also for the extra effort that the employee made for the company. The compensation can be divided into fixed and variable, and the compensation types can vary from salary, bonus, stock options and others income types. The variable remuneration is the reward for the effort and it varies according to the performance of each employee or the company as a whole. and can be linked to the goals of a period.

It is possible to identify the employees who contributed for the result through a performance management process. A common way for companies to conduct performance measurement is through performance indicators or KPI’s, this way the company’s goals are broken from strategic to operational and distributed among employees.

The incentives can be of short or long term. Incentives of short term are bonus from the goals compliance stablished for payments during the maximum period of one year, such as PER. The long term, are payments made in options to purchase company shares. In this post we will talk a little about the main differences between the most used programs of variable payment, check out:

variable compensation

PER (Participation in the Earnings or Results)

  • Your legal basis laid down in Brazil’s Constitution, (Law 10.101 of 19.212.2000) it’s the most common type of compensation, which use profit or other results such as sales, performance goals as a basis of calculation.  
  • Can be paid twice a year at max and must contemplate all employees of the company.
  • One of the reasons why it is popular is the fact that there is no incidence of labor and social security charges.
  • The Union along with the company must approve the application guidelines of PER and can participate in the committee.

Bonus

  • Bonus are gratifications offered based on goals defined by the company and can be paid without restrictions according to the management board criteria.
  • Lies on this tax modality on the amount to be paid.
  • The bonus can be realigned the goals according to market circumstances.

Stock Option

  • The increasingly participation of the Brazilian companies of open capital at stock exchange sophisticated even more the compensation system of high executives, who have the possibility to buy shares of their companies in advantageous conditions.
  • It is a way to compensate managers through contracts of stock option of the company’s shares.
  • Generally, the executive cannot make a withdrawal before a period ranging from 3 to 5 years.
  • Encourage managers to act as owners

 

To develop variable compensation polices is a great path for companies that wish to leverage their results, but it is also dangerous if the process is not executed with the appropriate attention. The strategy of compensation must reflect the company culture and consider its values, vision and business model.

The variable compensation has been working for both companies and employees because they see value at this system, it means to be recognized when the plan works and have the financial recognition of it. For a success implementation it is important to have focus at the final goal of the company and stagger measurable objectives.

Mereo helps to structure the variable compensation program of its clients, following the meritocratic principles and respecting an unfolding goals system. Transforming the team work into a priority seeking for the achievement of better results. Contact us and get to know us better!

Previous Post
Next Post

Related Posts

Share

LinkedIn

2 thoughts on “Variable Compensation Programs and its different perspectives”

  1. Thais says:

    Prezados, boa tarde!

    Gostaria de receber uma proposta para implantação, treinamento e acompanhamento de um sistema de remuneração variável em minha loja (ótica, com 6 funcionárias).

    Obrigada!

    1. Mereo says:

      Obrigado pelo comentário, Thais.
      Repassei seu e-mail com a demanda para nossa inside sales.
      Ela entrará em contato com você para demonstrar uma proposta adequada para sua empresa.
      Grande abraço e sucesso!
      Marcos Tadeu

Leave a Reply

Your email address will not be published. Required fields are marked *

Keep updated!

Get our news