Building an Effective Incentive Plan

Nowadays, companies definitely understand that a big part of their employees’ remuneration should be based on performance. Given such, building an incentive plan should consider the fact that everything should be performance based. The construction of any rewards program within a company should carefully consider that highest quality employees are retained, engage employees in the organization’s overall success and reward them according to how they have performed. 

All of these can be considered as objectives that should be looked into in drafting incentive compensation plans examples. These pay plans should assist to inspire workers by encouraging them to enhance performance and at the same time understanding the value of rewards, thus resulting to the increase of their chance to stay within the company.

To know more about incentive compensation plans examples, read more below. It is good to note that in designing incentive pay plans, aligning the company’s goal is given great significance, so that not only do employees get the most out of it, but they also realize the value they put towards the company’s overall success.

Incentive Compensation Plans Examples: What you need to know

• Production Pay

Paying workers by the no. of hours is not usually the best option given to any company. Sometimes there may be instances wherein there are no pending tasks to be done, however if paying employees using piece rate basis is more aligned to the goal of getting them to perform more and do better. This can also be modified to become a bonus opportunity especially by adding a little bit to the hourly rate just to ensure that the quality is not compromised.

• Commissions

Another incentive compensation plans example is commissions. Most industries use such to earn a percentage of every sale especially for those working under the sales industry including real estate, car selling etc. There may be variations in the details of commissions depending on a number of factors and the division of percentage points. Definitely, if you are working on such kind of incentive pay plan, it is good to look into a straight commission basis receiving pay from sales or having a fixed salary plus a percentage for every sale. 

 

• Merit Incentive Plans

This type of incentive pay plan is usually in connection with the performance review of an employee a year. For instance supervisors may gauge their employees’ performance and give them ratings. In a scale of 1-5, given that 5 is the best score, those employees who consistently get such rating can get an additional bonus or even a raise.Finally, in drafting any incentive compensation plans it is highly recommended that it should be put in writing to avoid ambiguous terms that could be subject to dispute at a later date. The plans should also provide the company with broad flexibility.

For more information:

http://www.incentives-solutions.com/services/design-of-compensation-plans/