Pay and reward

Pay and reward

Developing pay systems

The most common types of pay systems are base pay or variable pay systems.

The table below indicates the features commonly found in each:

Base pay

Variable pay

  • Set number of hours at agreed hourly/weekly/monthly rate
  • Overtime payments at, for example, one and a half times base pay rate
  • Productivity/attendance bonuses
  • Commission payments
  • Profit-sharing schemes

Base pay schemes are generally straightforward to administer. They allow employers to predict what their wage bill is going to be and are the type of scheme least likely to discriminate, where employees do identical or similar work.

Variable pay schemes allow the amount paid to an employee to vary from time to time. This can make it much more difficult to predict what your wage bill will be in the future, and staff may have less certainty about the amount of pay they are due. Variable pay can be linked to individual performance, or to collective performance based on teams, groups, or the entire business meeting specific goals and targets.

Variable pay can, in some circumstances, help motivate staff to increase productivity or reach targets. However, staff are also motivated by factors other than pay such as a pleasant working environment, good supervision, opportunities for training and development, consultation, and good work-life balance.

It is very easy for indirect discrimination to creep in to a variable pay system, and ongoing monitoring and evaluation is needed to make sure that this does not happen.

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