The companies believe in the variable part of the pay of employees. The variable compensation belongs among the most important components of the remuneration policy.
Generally, the variable part of the compensation policy needs to be strictly managed and the management in the organization has to be mature enough to work with the variable compensation correctly.
The company starts to provide variable part of the compensation or bonus with the idea that it will increase the performance of employees. The bonus works correctly for two or three years, but later, the company results are not that great and everyone would expect not to pay any bonuses to the employees.
In reality, the management has no courage to provide employees with the feedback on the company results. The employees take the bonus as not a variable part of the salary or pay; they take bonuses as a postponed payment of the company, probably to have a better cashflow.
The bonuses are not variable at all. Just small part of the whole variable compensation is really variable and the rest is usually a shadow part of the base salary. The employees do understand they have to wait for the bonus payout and the management demonstrates how variable the bonus is. But the bonus is variable just one way. It can be higher every year; each decrease in the bonus payout is taken as a serious injury for the employees.
The employees set their expectations about the bonus payout quickly and they are really demotivated, when the bonus does not meet their expectations. They are not interested in the company results; they are interested in their own personal income. The variable part of the compensation policy is not that variable as you can think.
