Successfully Designing And Implementing Variable Pay Schemes

Course Two: Wednesday, 19 – Thursday, 20 November 2008

Course Timings: Registration and coffee will be at 08.00 and the course will commence promptly at 08.30, concluding with lunch at 14.30. There will be two short breaks at appropriate times.

Many companies in the GCC and Middle East have some form of incentive or bonus scheme, but many are based either on years-of-service, seniority or company performance, with little or no recognition of individual performance. In an increasingly competitive environment, when you want to attract and retain the best individual employees and high-performers, these methods of paying for performance may be unsustainable in the long-term, and other approaches to variable pay and bonuses and incentive schemes may be necessary.

Course Objectives
The aim of this course is to show you how to develop practical bonus schemes, incentive schemes and variable pay policies that meet the needs of the business, while allowing you to attract, motivate and retain good quality employees. Most employers want to ensure that they can “attract, retain and motivate” the best employees and teams, and this two-day course will cover the key areas in the overall compensation and benefits package that enable employers to adopt best-practices and help them compete more effectively in the war for talent whilst achieving optimal cost-effective performance for the employer.

Numerous forms of variable compensation and incentives and benefit plans provide employees with the opportunity to earn higher pay where performance can merit. This course will explore the different  types of variable pay and incentive plan options available including: variable pay as a total remuneration strategy, short term incentive plans (such as profit sharing bonus schemes, individual performance incentives) and long term incentive options (including stock options and equity based bonus).

This course is suitable for both HR generalists and remuneration specialists, and the aim of this two-day course is to enable you to get a better understanding of how to use compensation design to attract, motivate and retain employees. The course also covers key trends in the GCC compensation and benefits marketplace for employees, and enables you to know how to use the overall remuneration package more effectively in managing performance of employees and achieving better business results through a more effective approach to the compensation and benefits programme.

Course Methodology
This course will provide you with information and guidance on how to develop practical incentive schemes to meet the needs of your business. You will have the opportunity of designing and implementing various incentive schemes, as well as sharing ideas and experience.

You will work on typical incentive scheme problems and issues, including actual issues and problems that are identified by the participants during the course. There will be practical case studies to work with in an ‘action learning’ environment.

Case Studies
The course will include the following case studies designed around a company based in the GCC and Middle East:
• Building the internal case for introduction/revision of a variable pay programme
• Selecting the most appropriate variable pay or bonus programme
• Designing the main dimensions of a bonus scheme or incentive programme
• Preparing an effective communication plan

Course Outline

Introduction
• Types of variable pay schemes
• Best practice in variable pay management

The Role Of Variable Pay Schemes
• How incentive schemes can be used to help achieve business goals
• Schemes that have proved successful, particularly in the Middle East
• Current trends on variable pay and incentives

Retention Benefit Schemes For Employees
• Completion of contract bonuses
• Provident funds
• Vested benefits as employment contract handcuffs
• Enhanced EOSB gratuity

Critical Issues For Incentive Schemes
• Linking measurement to business strategy
• Linking payment to performance
• Importance of ‘build up then pay out’ process
• Variable pay as a component of total remuneration strategy

Performance Management And The Goal Of Linking Pay To Performance
• Establishing targets and measures
• Measuring and tracking performance (of the employee and the company)
• Building a performance monitoring system linked to business performance
• Reviewing and rating individual employee performance
• Providing coaching and support to managers as part of a pay for performance

Types Of Incentive Schemes
• Recognition versus incentive
• Why have variable pay?
• Improved shareholder returns and employee retention
• Short-term incentives
• Long-term incentives
• Cash-based incentives
• Equity-based incentives

The Role Of Recognition Programmes – Which Variable Pay Schemes Work?
• Identifying the most appropriate schemes for your company
• Understanding the popularity of incentive schemes
• Some of the challenges of developing incentive schemes in the Middle East
• The case for recognition
• Types of recognition plans

Incentive Scheme Designs And Alternatives For Short-Term Plans
• What motivates an employee?
• Importance of build-up and then pay-out
• Gearing effects and bonus multipliers
• Individual plans, team plans, departmental plans
• 13th month bonus payments
• Profit-sharing bonus
• Gain-sharing bonus
• Performance-target results bonus
• Discretionary bonus
• Balanced scorecard bonus
• Individual tiers or cascading tiers
• Prevalence of various types of incentive plans

Process For Designing Short-Term Plans
• The principal stages in designing an effective incentive scheme
• Who should be involved in creating your variable scheme and why they are important
• Plan purpose and objectives
• Determining eligibility
• Selection of performance measures
• Funding the plan (build up)
• Determining target plan payment (pay out)
• Defining plan payout criteria
• Distribution of incentive earnings

Share Ownership Incentives And Long-Term Plans
• Equity option schemes
• Equity grant schemes
• Other benefit enhancements

How To Implement And Manage A Variable Pay Scheme
• Identifying the key challenges and pitfalls of implementing an incentive scheme
• Managing the process of design and implementation