Bonus Pay??

Do you know the difference between bonus pay and variable pay? Chances are your bonus pay program is truly a variable pay program. Why does it matter? Variable pay that consistently falls short of the target is another way to tell you that you are being underpaid for your position.

A bonus is something paid to you that isn't part of your regular salary. It is an extra form of compensation (an addition to your regular salary).

Variable pay IS part of your regular salary. It is the portion of your regular salary that is "at risk" every year and often dependent on company and/or employee performance during the plan year. Of course your employer won't tell you that you have pay at risk. Instead they will often disguise this portion of your salary as a target in a bonus, incentive, or performance pay plan. Bonus, incentive, profit sharing, and performance pay programs are all just other names for a variable pay program.

To illustrate, company XYZ is creating a new position for a Director of Finance. The HR department at XYZ will determine how the new position fits within the company's pay structure. They then will recruit and hire for this position offering the new employee a compensation package and within that package will be a base pay component and a variable pay component.

Let's assume that the HR department at XYZ values the new Director of Finance position at $120,000 a year. Of the $120,000, the company will pay $100,000 as the base salary and the other $20,000 will be a "target" in a variable pay program. If the employee in the position averages $10,000 a year over a five year period in variable pay, then the employee is being underpaid by $10,000 a year.

It is important to know your compensation structure or the worth of your job in the open market. Consistently being underpaid is a bad career choice and a lost opportunity. If the company you work for makes it difficult to earn your pay at risk, then you are being underpaid for your position. Goals to make the variable portion of your pay need to be obtainable. Unfortunately, many companies do the opposite and put stretch goals in place for employees just to earn the variable portion of their pay. This allows them to underpay their employees year over year.

To learn a little more on compensation or how getting that little extra a year will increase your overall wealth, visit http://www.givemebigmoney.com/base_pay.html
and
http://www.givemebigmoney.com/pay.html