The compensation model consists of three main elements: Paying for the person (basis an individual’s skill set and experience), paying for the position (based on job worth and market benchmarking), and paying for performance basis individual and organization performance. The first two are mostly decided before an employee enters the organisation, while the ‘Pay for performance’ focusing on individual and organizational performance forms the majority chunk of the flexible pay in an organization and can attract and lure the employees to perform better.

For managing the performance pay in an effective manner, the performance objectives should be focussed on a particular outcome, be specific, attainable, measurable, related to time which is mostly at an individual level. According to Nimitt Thakkar, Assistant General Manager HR, CapitalVia Global Research Ltd, at the organization level, goals of cost control, rising efficiency, increasing productivity, project completion and customer service are prominent and for such goals, flexible pay and benefits become important. Organizations also try to motivate their employees, not only through monetary flexible components, but also make best use of the non-monetary flexible benefit programs.

A chain of hotels in Delhi would be very dependent on their employee’s performance and rely heavily on an employee incentive program in which workers/employees are rewarded for the over-achievement of targets. This is generally for a team or a group of employees. For individual employees, it takes the form of a bonus. Rewarding employees through incentives is linked with the Motivation theories of Herzberg, Skinner and Vroom. They make the incentive plans more relevant by ensuring challenging work, high expectancy for rewards, chasing adequate behavior for rewards. There are also other individual incentive programs like straight piecework (having direct relation between results and rewards) and standard hour plans (extra payment basis rate for extra production exceeding the standard per hour/ per day) are mostly used for workers in the manufacturing sector.

Compensation plans for sales folks are also heavily dependent on commissions and should encourage the behavior the organization desires. Plans could become less effective if there is no capping on the commissions and should motivate sales. Objective measures should be used to analyze the effectiveness of sales quotas: whether three-fourth of the employees exceeded their quotas, approx. 10% have shown significant improvement as compared to the previous months, and approx. 10% have not, but have received performance counseling for the same.

When it comes to providing benefits which are flexible, a lot of IT companies provide their employees flexible working schedules like Flextime and Telecommuting, and compressed worksheets. It is very useful for single parents and millennials. Flextime offers workdays offers flexible midday hours to an employee and the employee can decide his/her work hours. The employee can choose the work hours be 7 am-3 pm, 11-8 pm and most employers provide a leeway before 9 am and after 5 pm which are called as informal flexible work schedules. Telecommuting is another way where through which companies are using technology to work from home. Almost 50 % of the companies provide telecommuting on an ad-hoc basis and around 20% on a full-time basis. It is estimated that more than 10 million Americans work from home for at least one day a week with days next to the weekend being the preferred days.

Compressed worksheets also offer employees to work for less days in a week for elongated hours in a week. Pilots do not work traditionally for 5 days and 40 hours. Hospitals have employees working for 3 days, 12 hours each and taking a leave of 4 days after that. Research indicates there is a high correlation between flexible work schedules and high productivity and reduced absenteeism.  Job sharing and work sharing are also very common, job sharing gives an opportunity to 2 people to work on a job in a 40 – hour work model, where one employee can work in the morning and the other one in the afternoon.  Basis a research, around 25% of the employees allow job sharing to happen.  Work sharing is another method in which ensures layoff reduction by ensuring some employees work and get paid for lesser hours.

Considerable amount of attention needs to be paid by the HR Managers to see whether the incentive programs motivate the right behaviors. Poorly designed incentive plans can dismantle the organisation, an example of that is the Food Corporation of India, where the frontline workers were paid a handsome salary of 4 Lakhs monthly, due to poorly designed incentive plans. 12- hour shifts are not ideal ones and employers are going to the extent of providing treadmills, special lighting to ensure employees do not feel fatigued at the workplace.

Compensation specialists should allocate a specific fund to all employees and employees are given an opportunity to spend the benefits, the way they want. The programs are successful when there is a limit to the cost of each employee’s benefits package. Considerable attention also needs to be paid by the employers for cost-reduction tactics, specifically for sick leave absence Mostly employers prefer to pay back unused sick leaves of the employees, to avoid ill employees from coming to the office. Apart from that, lotteries are organized to pay monthly cash prize to regular employees. Attendance Bonus is also used as an incentive in the Indian manufacturing sector which is paid out quarterly. Overall, any organization’s pay for performance policies and practices should be dependent on an employee’s skills and performance which should be aimed at achieving company’s strategic goals.