The downside of financial incentives

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How much variable pay to use depends on the level of job and total income, as well as the sector norms where you work.

“As a general guide, if you don’t have enough scope in your variable pay to differentiate, it’s too low and hardly worth the effort. If it doesn’t feel equitable to employees, because they feel the variations are too wide, it’s too high,” Warder said.

As a final tip, Warder suggested that an incentive will only work if the person you’re giving it to can affect performance against the targets you’ve given them; in some cases, that’s just not going to be possible.

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