Incentive Pay – Short and Long Term

November 1, 2014

In terms of time-frames, the incentive plans can be framed around a single year's performance and paid out in cash.

Incentive Pay has been referred to by many different names – variable pay, performance based pay, bonus and so on. High growth markets like India are harnessing the potential of variable pay as a motivating tool for employee performance as well as retention. However, there is a fair degree of complexity due to the various provisions present within plans and the manner in which they are designed to be optimal use. In order to understand this concept better it is essential to assess what are the various reasons for which this is given to an employee –

1. The most common reason is performance, since when an employee meets his or her preset performance goals, this is paid out as a financial reward for contributing to the company’s success. One can further segment it here into annual bonus, sales incentives or commissions, spot incentives and so on. This is not fixed and is also known as pay at risk.

2. Another reason is Sign-on or Joining Bonus which some organizations give to new employees who are joining the firm. The reasons could be discretionary....

Simran Oberoi

is an HR expert with over 20 years of experience in advisory, knowledge development, and research, in Compensation & Rewards, Diversity, Equity and Inclusion and Leadership Development. She is an Associate Director at Aon, in the Learning Center, which works with clients on bespoke learning journeys to enhance their enterprise and HR capabilities. She is also a TEDx speaker, SHEROES Champion, and Faculty for Diversity & Inclusion.

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