To attract and retain dealership employees, offer a well-rounded compensation package. Compensation is comprised of four main parts: fixed pay, variable pay, short-term incentive pay, and long-term incentive pay. By utilizing all four parts of compensation, you positively reinforce employee efforts, incentivizing them to continue to work hard by providing them with additional pay. The four parts of compensation are defined as:
- Fixed pay: the base pay of compensation, fixed pay does not vary with performance or results and is determined by your dealership’s pay structure.
- Variable pay: a one-time payment, variable pay is often a bonus, and must be re-established and re-earned every time it has been won.
- Short-term incentive pay: this variable pay is highly focused and based solely on performance over a period of one year or less.
- Long-term incentive pay: this variable pay extends over a period longer than a year, and includes forms of pay such as stock options, performance shares, performance units, and cash.
By balancing all four of these compensation types, you are offering an enticing package that employees can continuously affect and work towards, inspiring them towards greater performance.
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