Incentive pay

Updated April 23, 20244 min read

What is Incentive pay?

Motivational tools used by organizations to cater to the welfare of their employees can come in different forms with the sole aim of reinforcing employees' engagement and effectiveness. Incentive pay is one of the effective tools adopted to boost employees' morale and increase productivity.

What is Incentive pay

Forms of Incentive pay

a) Casual incentives are smaller-scale rewards and acknowledgments, such as a non-financial gift or a modest cash bonus for achieving a goal. They are often a less formal kind of incentive payout and can be given at any moment.

b) Structured incentive: In pay incentive programs, structured incentives are clearly stated and often consist of a monetary prize provided as a percentage of a production or sales objective that has been met.

Benefits of Incentive pay

a) Increased engagement

b) Effectiveness

c) Efficiency

d) Satisfaction

e) Increased productivity

f) Absorption

g) Commitment

Downsides of Incentive pay

a) Promotes personal gain.

Although incentive pay has the potential to be a powerful motivator, it is not always effective since employees may become more self-centered and concentrate on what they must do to succeed, often at the expense of their team or the organization.

b) Can be excessively pricey

If the costs of rewarding the individuals who take center stage exceed the company's budget, the overall cost to the business may be high.

Types of Incentive Pay

Monetary incentives:

a) Equity

b) Sign-on bonuses

c) Quarterly or yearly bonuses

d) Commissions

e) Stock shares

f) Debit card rewards (for rebates)

Non-monetary incentives:

a) Award or recognition

b) Flexible work

c) Special treats

d) Travel rewards

f) Wellness programs

Abhishek Kathpal

Abhishek Kathpal

Abhi is the co-founder of Longlist.io, enabling 50+ recruitment businesses build better client and candidate relationships.