ABSTRACT
Compensation practitioners should be evaluating the fundamental makeup of the total rewards packages they provide to employees. Many organizations felt they had learned how to manage employee rewards in the sustained boom period of the 1990s and after the dotcom crash of 2000–02. Scenario planning is critical for preparing for the future. It is not the answer to current challenges, however. Organizations should attempt to project whether a subsequent upturn in the economy will be likely to require staff additions, perhaps even before all the severance payments have been covered by reduced payroll costs. A strategy that can be viable over the longer run is to revise how base pay and incentive plans are designed and how budgets and incentive funds are allocated. The decision to make variable compensation a larger part of the total direct compensation package will require considerable staff effort and extensive communication.
