INCENTIVE COMPENSATION

RYAN M. ISRAEL - Reporter

WHAT ARE INCENTIVES
Incentives are rewards given to employees for performing
beyond the standard requirements.
Incentives are also sometimes referred to as variable pay.
Factors to consider in establishing and maintaining incentive
system
They must be tied to performance.

They must be designed to cater individuals who have

different needs.
Factors to consider in establishing and maintaining incentive
system
They must consider the specific environment and
limitations of the organizations.

They must be reviewed periodically.

Types of incentives
- Individual incentive plan
- Group incentive plan
- Organizational incentive plan
Individual incentive plan
Individual incentive plans are those designed to motivate the
individual employees to perform beyond standard
requirements.
CLASSIFICATION OF Individual incentive plans:

PIECE-RATE SYSTEM – THIS TYPE OF INCENTIVE PLAN PAYS

INDIVIDUAL EMPLOYEES BASED ON THE NUMBER OF UNITS
PRODUCED BY EACH.
CLASSIFICATION OF Individual incentive plans:

COMMISSIONS – IS A FORM OF INCENTIVE USUALLY PAID TO

SALES EMPLOYEES. IT IS BASED ON A PERCENTAGE OF
SALES IN UNITS OR PESOS.
CLASSIFICATION OF Individual incentive plans:

Bonuses – is a extra payment given to employees for

good performance.
CLASSIFICATION OF Individual incentive plans:

Merit pay – this term may be defined as individual pay

increases based on the rated performance of individual
employees in a previous time period.
Group incentive plan
Group incentive plans are those designed to reward work
teams, project member, or departments.
Organizational incentive plan
Organizational incentive plan are rewards designed to cover
all employees in an organization.
Organization-wide incentive plan consist of gain sharing,
profit sharing and employee stock ownership.
gain sharing
These are company-wide group incentive plans that provide
additional pay to employees based on group performance.
Profit-sharing plans
Are those that reward employees using the profits of the
enterprise as basis.
Employee stock ownership plan
Some company stocks as an incentive to employees for
good performance. Stocks not only represent ownership in
the company but also a chance to share in the profit, or in
the income generated by the appreciation of the stocks’
value.
SALAMAT