Abstract
M.Phil.
Purpose:
The purpose of the research was to evaluate the extent to which the constructs and dimensions identified by De Swardt (2005) are valid in describing and predicting the outcome of a variable pay plan.
The following secondary research questions were therefore asked:
What is the reliability of the eleven dimensions and three constructs?
What are the statistical characteristics of the 11 dimensions and 3 constructs, and can they be used to benchmark new variable pay plans?
How reliable are the 78 items as test criteria for the 11 dimensions and 3 constructs?
Motivation for study:
The primary rationale for this study was the unavailability of empirically tested models and the lack of validated variable pay instruments that evaluate the outcome of any variable pay scheme.
Design/Methodology/Approach:
The study followed a quantitative research methodology, with the primary objective of assessing outcome similarities through Structural Equation Modelling (EQS) factor analysis. Both exploratory and confirmatory factor analysis were performed to the sample data to measure correlations.
Findings:
The findings of the research highlighted that there were minimal differences between De Swardt’s variable pay models. Differences were identified by analyzing the reliability statistics and factor analysis rules of assessing model fit. Following certain research limitations, the research questions were further
refined for use in future studies. The research findings confirmed De Swardt’s (2005) theoretical model of predicting variable pay outcome.
Research limitations:
Although the study was conducted amongst a wider population group, individual organisation feedback from the selected participants was not balanced. A considerably larger portion of the feedback was obtained from the company with which the researcher was employed.
Practical implications/Value-add:
The outcome of this research confirms the commercial applicability of the instrument in identifying potential flaws in any variable pay scheme during the early stages of implementation. This will have a positive impact on an organisation’s bottom line. Additionally, quantifying the impact of variable pay plans will not only enhance HR’s credibility with regards to the broader organisational goals, but will encourage a well-structured, performance-linked variable pay system based on tested models.