Incentive-based compensation strategies are gaining in popularity with employers. Instead of paying employees a flat rate salary, the employees are paid based on their performance. Properly implementing incentive-based compensation strategies within your business can be a win-win for both you and your employees. It gives your employees something to work hard at and achieve and it helps to boost productivity, efficiency and sales for your business. But improperly implementing these strategies can be a motivation buster or even cause employees to leave your company. Here are a few tips on how to effectively implement incentive compensation strategies within your business.
Have the Bulk of the Pay Still Be Salary Based
Many people do not like to work commission-based position. They want to know exactly how much they will earn each and every paycheck. And while compensation strategies may not be targeting commission, if you make a bulk of the pay incentive-based, it can make it hard for employees to predict their paychecks or budget. As such, a bulk of their pay should still be salary based, while only a small percentage should be incentive based.
Ensure the Goals are Achievable
Another important tip to effectively implementing incentive compensation strategies is to ensure the goals are achievable. If you set the bar too high, few employees will reach the level of earning an incentive. This may decrease morale or make employees feel bitter or like they are failing at their job, especially if they tried to perform. Instead, consider a step system or sliding scale system. The higher the scores or the better the job, the more you earn. This way, even average performers earn a small incentive, while top performers earn more.
Consider Benefit-Based Compensation as Well
The last tip is to consider benefit-based compensation as well. While money is always a great incentive, many employees today wouldn't mind receiving other items as compensation. Paid vacation days, gift cards to their favorite restaurants, or even paid weekend getaways are all very much appreciated and welcome by top performing employees.
Incentive-based compensation strategies are meant to give your employees something to strive for and work towards, not to punish them. If you decrease the salary of those who are struggling to meet goals or make goals unrealistic, employees may lose motivation and production can be worse than before. Instead, ensure the benchmarks for the rewards are achievable and make the rewards more of an incentive, rather than the bulk of their pay.
Contact a consulting company, like Fox Lawson & Associates, A Division of Gallagher Benefit Services Inc., for more help.