Should you be allowed to choose your own salary?
Today's Wall Street Journalreports (subscription required) on another new trend: some employers let workers choose their salary. Those who opt for a higher salary have more limited bonus potential. The idea is to give workers a chance to have more skin game, while providing flexibility to those who need a more reliable stream of income.
One potential problem with this program -- and incentive-based pay in general -- is that earnings can fluctuate wildly based on broader economic conditions over which the individual worker has no control. Opting for a low base salary and higher potential bonus can amount to little more than a big bet on the future direction of the economy.
But that's a criticism of incentive-based pay in general, and one that can perhaps be mitigated by tying pay to relative performance -- an employee whose production falls 5% when the industry as a whole is off 10% should not be penalized. But giving workers greater control over how they are paid is a good idea, and one that should help companies recruit better people.