Incentive Compensation Definition Factors Types Incentive for professionals Incentives for executives Design and implementation

Incentives Definition: Rewards given to employees for performing beyond the standard requirements. - addition to base salary employees are given incentives.

Incentives Factors in establishing Incentives System: They must be tied to performance. Efforts and rewards must be directly related to each other. Designed to cater to individuals who have different needs. Specific environment and limitation of the organization. Review periodically to find out if they are still effective.

Incentives Types: Individual incentive plan - Designed to motivate individual Classification: piece-rate –pay based on units produced Commission – straight commission (Sales X rate), small salary plus commission (exceeds the budget sales goal) bonuses – extra payment for good performance merit pay – increase based on rated performance Group incentive plan – designed to reward work teams, project, departments. Organizational incentive plan – reward that cover all employees in the organization. Kinds: Gain sharing plan – based on group performance Profit sharing plan – using profit of enterprises as basis (deferred plans, distribution plans, combination plans) Employee stock ownership plan – stock ownership

Incentives For Executives: Base salary Short term incentive or bonuses Long-term incentives or stock plans Perquisites

Incentives Designing and Implementation: Defining the required performance criteria Indicator various levels of operation Requirement: right leader must be selected Clear set of goals must be communicated Performance culture aligned with strategy Develop a comprehensive reward framework Incentive directed toward employee performance beyond standard Desired behavior must be reinforced Incentive pay system must be properly funded – success of the system based on sufficient funds.

Thank you GOD BLESS US ALL!! Assignment: (Optional) Incentive plans Group Work : Present incentive plans for executives and rank and file employees of your organization Thank you GOD BLESS US ALL!!