3. The principles for creating a bonus fund
Apart from the presented fixed compensation components, compensation systems include variable elements related to companies’ financial results. Bonus level calculation is based on the production analytical function model. This function uses a natural approach based on cost calculation. It presents the production function with seven specified arguments. The analytical form of production function divides operating costs into compensation understood as labour costs (W) and non-compensation costs (Km) decreased by risk-related costs (Kr). This differentiation introduces the annual asset wear and tear rate (z), the asset impairment rate (s) and the level of pay for human capital (u). Therefore, the production function equation can be expressed in the following way