Which of the following is NOT true about variable transactional compensation?
a) future rewards such as retirement benefits are likely to be used as a part of compensation
b) an organization with variable transactional compensation will likely pay more than other employers
c) variable transactional compensation provides strong monetary incentives for high performers
d) new employees are often paid more than current employees
The correct answer and explanation is :
The correct answer is: a) future rewards such as retirement benefits are likely to be used as a part of compensation.
Explanation:
Variable transactional compensation focuses on immediate, performance-based monetary rewards, not long-term benefits like pensions or retirement plans. In this model, employees are compensated based on their current performance and results, rather than being promised future rewards. Therefore, option (a) is NOT true because retirement benefits are long-term, future-oriented rewards, which do not align with the immediate, transactional nature of variable compensation.
Now, let’s briefly explain why the other choices are generally true:
- b) An organization with variable transactional compensation will likely pay more than other employers:
This is often true because employers need to offer higher short-term financial rewards to attract and retain high-performing employees, especially when there’s little job security or long-term promise involved. - c) Variable transactional compensation provides strong monetary incentives for high performers:
This is a key feature of the model. High performers are rewarded immediately and significantly with bonuses, commissions, or other financial incentives, encouraging them to maintain high levels of productivity. - d) New employees are often paid more than current employees:
This can happen because employers use market-rate pay to attract new talent. In a system that focuses on performance and immediate rewards rather than loyalty, new hires might receive higher starting salaries or sign-on bonuses, even if current employees have more tenure.
In summary, variable transactional compensation is all about short-term, high-impact financial rewards based on performance, not about building future security through benefits like pensions. Companies that use this system prioritize immediate results over long-term employee retention strategies. That’s why future rewards like retirement benefits are not typically part of this compensation structure.