Incentive Compensation

Although many people use the terms interchangeably, there are considerable differences between Bonuses and Incentives.  And those differences relate to the specificity inherent in incentives, which consist of predetermined performance goals and identified award levels.  Bonuses, however, are usually more discretionary in nature.

There are at least ten (10) good reasons why a company might consider adopting an incentive plan.  They are:  

1. Allows the company to focus attention on certain desired performance.
2. Since rewards are tied to achieving specified performance, uncertainty as to entitlement is eliminated.
3. The company is forced to actually plan ahead, and identify its expectations.
4. By putting a portion of the compensation "at-risk", the company can control fixed costs associated with salary increases.
5. Typically, incentives are not included in calculating benefits, and therefore can save the company in the long-run.
6. Helps a company to recruit better condidates, since prospective employees recognize the opportunity to earn higher compensation based on their contribution.
7. Allows the company to "put its money where its mouth is", by tying pay to results.
8. Since incentives are typically designed to be "self-funding", this means funds are available when goals are achieved.
9. The majority of companies offer some form of incentives; therefore, in order to remain competitive, it is essential to offer some form of incentive.
10. We've run out of reasons, but our clients agree that incentives make sense!

For more reasons and an opportunity to discuss if incentives are right for your company, please call Paul Dorf, Harry Schum, Mary Rizutti or Diana Neelman at (877) 934-0505.