Which compensation practice encourages a shift toward increased variable rewards?

Variable rewards in compensation practices are designed to align employee performance with organizational goals by offering rewards that fluctuate based on the success of the business or the individual. Implementing a commission structure is particularly effective in encouraging this shift toward variable rewards.

By creating a commission structure, organizations incentivize employees to boost their performance as earnings are directly linked to sales or specific outcomes. This approach not only motivates staff to work harder for higher sales but also allows businesses to reduce fixed costs because compensation is not solely reliant on static salaries.

In contrast, maintaining fixed rewards, such as fixed salaries or pay grades, does not promote variability in compensation. This method results in employees receiving a steady income regardless of performance levels, which may lead to a lack of motivation to exceed expectations. Therefore, the implementation of a commission structure effectively embodies a compensatory strategy that emphasizes variable rewards as a motivational tool.