Incentive compensation is a type of pay that is tied to an employee’s performance. It is often used in sales, but it can also be used in other areas of the business, such as customer service or marketing. Incentive compensation can be a valuable tool for motivating employees and driving performance.
Benefits of incentive compensation:
- Motives employees to work hard and achieve their goals
- Can be aligned to company metrics that drive and align the right behaviors
- Attracts and retains top talent
- Improves employee morale and satisfaction
There are many different types of incentive compensation, including:
Commissions: Commissions are a percentage of the sales that an employee generates.
Bonuses: Bonuses are a lump sum of money that is paid to an employee based on their performance.
Stock options: Stock options give employees the right to buy shares of the company’s stock at a discounted price.
Performance-based pay: Performance-based pay is a system that ties an employee’s pay to their performance.
When coming up with an incentive compensation plan, there are a few best practices to keep in mind:
- Make sure the plan is aligned with the company’s goals. The incentive compensation plan should be designed to motivate employees to achieve the company’s goals.
- Make sure the plan is fair and equitable. The incentive compensation plan should be fair to all employees, regardless of their position or title.
- Keep it easy to understand.The incentive compensation plan should be easy for employees to understand and to track their progress.
- Ensure it’s affordable for your company.
- Use a sales incentive compensation platform so that reps and leadership can check their progress toward goal and know how much they can expect to make from incentive pay
Incentive compensation can be a valuable tool for motivating employees and driving performance. However, it is important to make sure that the plan is aligned with the company’s goals, fair and equitable, easy to understand, and affordable.