Contextual Determinants of Variable Pay Plan Design: A Proposed Research Framework

Increasingly, organizations are using variable pay plans to reward employees for the results that they achieve. Current discussion of variable pay focuses on variable pay plan design mechanics, with insufficient attention given to contextual variables that may affect variable pay plan design. We offer a preliminary framework for examining the contextual determinants of variable pay plan design. Components of the framework include characteristics of the environment, characteristics of the organization, and the organization's pay strategies. Propositions for future research are offered.