Variable Pay Plans/Bonuses Popular Among Large U.S. Employers

More than 9/10ths (92 percent) of large employers surveyed use some sort of variable pay plan, or incentive plan, for their employees, Focus Research reports.

Employers prefer giving smaller raises and making up the difference with bonuses only if certain performance targets were met. In a better economy, or if not everyone was doing this, the practice wouldn’t stand, but as we said, 92 percent of employers are doing this, up from 78 percent in 2005.

The same survey, conducted by Aon Hewitt, found that the average large firm is planning to award an average of a 2.9 percent base salary increase in 2012, up slightly from 2011 and more than a percentage point better than “the record-low pay raises workers saw in 2009 (1.8%).”

“Three percent is the new 4%, meaning we are not likely to be back to the 4% levels of the late 1990s any time soon,” Ken Abosch, Aon Hewitt’s Compensation group leader, told Focus Research.

Variable pay is also the new..whatever, we suppose. Abosch told Focus that these two factors are “the new normal,” though these strategies behoove managers to hold “performance discussions throughout the year, so employees know what they are doing well and areas for improvement in order to maximize productivity and potential pay opportunity.”