Support by management — executives and line managers must demonstrate commitment.
2. Acceptance by employees — employees must accept the plan as equitable.
3. Supportive organizational culture — the organization's culture must be based on teamwork, trust, and involvement of employees at all levels when setting performance goals. .
4. Timing — the plan must be launched when there is minimal risk of economic downturns that would affect the size of the awards.'
With variable pay, a percentage of an employee's paycheck is put at risk. The result is that if business goals are not met, the pay rate will not rise above the base salary. Annual raises are not guaranteed. For example, base pay might be set at S$30,000 a year with a variable award or end-of-year bonus of up to S$6,000. The individual could earn all or part of the bonus by meeting business objectives such as lowering costs, raising pro-ductivity, raising quality, or increasing customer satisfaction. The base pay for the next year would return to S$30,000, and the employee would again be eligible to compete for the additional variable reward.