Variable Pay

Examples of Variable Pay in the following topics:

• Monetary Employee Compensation

  • Monetary compensation can be either guaranteed (base) pay or variable pay and positively correlates with job satisfaction.
  • Monetary compensation includes both guaranteed (base) and variable pay.
  • Variable pay is a monetary reward that is contingent on discretion, performance, or results achieved.
  • There are different types of variable pay plans, such as bonus schemes, sales incentives (commission), overtime pay, and more.
  • Variable pay is common in industries such as real estate or insurance, where pay is based on commission or the amount of sales generated by the employee.

• Employee Compensation and Benefits

  • The most common form of guaranteed pay is the basic salary.
  • Variable pay—Monetary compensation paid by an employer to an employee on a discretionary basis.
  • Variable pay is contingent on discretion, employee performance, or results achieved.
  • There are different types of variable-pay plans, such as bonus schemes, sales incentives (commission), and overtime pay.
  • For example, a variable-pay plan might be that a salesperson receives 50% of every dollar they bring in up to a certain amount of revenue.

• Employee Pay Decisions

  • Variable systems like pay-for-performance create a policy line that connects job pay and job evaluation points.
  • Range of pay rates refers to the variety in pay rates that workers in one job area might receive.
  • A pay grade system is simply tiered levels of pay based on position, experience, and seniority.
  • Variable pay decision systems like pay-for-performance are designed to motivate employees and ensure intra-organizational cooperation.
  • Merit and incentive pay programs are common forms of pay-for-performance systems.

• Short Run Firm Production Decision

  • However, variable costs and revenues affect short run profits.
  • Continue producing if average variable cost is less than price per unit.
  • Revenue would not cover the variable costs associated with production.
  • Instead, during a shutdown the firm is only paying the fixed costs.
  • When a firm is shut down in the short run, it still has to pay fixed costs and cannot leave the industry.

• Formulas and Problem-Solving

  • Such an equation may include many variables so long as all are of the first order, and the value of any one variable can be calculated if the values of all the other variables are known.
  • You plan to pay off the debt in its entirety within 15 months.
  • Plugging the known values into the above formula, we can determine that you will pay $500 in interest.
  • Some have more variables than others, but none has a variable of order higher than one.
  • Use a given linear formula to solve for a missing variable

• Introduction

  • Professionals often want to know how two or more numeric variables are related.
  • The amount you pay a repair person for labor is often determined by an initial amount plus an hourly fee.
  • The type of data described in the examples is bivariate data - "bi" for two variables.
  • In reality, statisticians use multivariate data, meaning many variables.
  • In this chapter, you will be studying the simplest form of regression, "linear regression" with one independent variable (x).

• Introduction to multiple regression

  • The method is motivated by scenarios where many variables may be simultaneously connected to an output.
  • And, on average, how much more do buyers tend to pay for additional Wii wheels (plastic steering wheels that attach to the Wii controller) in auctions?
  • Notice that the condition and stock photo variables are indicator variables.
  • Using indicator variables in place of category names allows for these variables to be directly used in regression.
  • Multiple regression also allows for categorical variables with many levels, though we do not have any such variables in this analysis, and we save these details for a second or third course.

• Scatter Plots

  • Users can do everything from paying for parking to buying a TV set or soda from a machine to banking to checking sports scores on the Internet.
  • High values of one variable occurring with high values of the other variable or low values of one variable occurring with low values of the other variable.
  • High values of one variable occurring with low values of the other variable.
  • However, we only calculate a regression line if one of the variables helps to explain or predict the other variable.
  • If x is the independent variable and y the dependent variable, then we can use a regression line to predict y for a given value of x.

• Shut Down Case

  • A firm will implement a production shutdown if the revenue from the sale of goods produced cannot cover the variable costs of production.
  • When determining whether to shutdown a firm has to compare the total revenue to the total variable costs.
  • If the revenue the firm is making is greater than the variable cost (R>VC) then the firm is covering it's variable costs and there is additional revenue to partially or entirely cover the fixed costs.
  • When a firm shuts down it still retains capital assets, but cannot leave the industry or avoid paying its fixed costs.
  • A firm that exits an industry does not earn any revenue, but is also does not incur fixed or variable costs.

• Experimental Research

  • By creating a controlled environment, researchers can test the effects of an independent variable on a dependent variable or variables.
  • The dependent variable, on the other hand, depends on the independent variable, and will change (or not) because of the independent variable.
  • The dependent variable is the variable that we want to measure (as opposed to manipulate).
  • Control groups are used to determine if the independent variable actually affects the dependent variable.
  • When running an experiment, a researcher will want to pay close attention to their design to avoid error that can be introduced by not balancing the conditions properly.