Three Ideas To Help Design an Employee Incentive Program

by on June 19, 2009 · 0 Comment POSTED IN: HR Info Center

Principles to Make your Employee Incentive Program Work

Companies are rewarding their employees through an employee incentive program in all sorts of ways. Here are three ideas to help design your own employee incentive program.

  1. Operate with as few people as possible because people are expensive. The fewer people you can do the job, the less expensive that would be for your organization to operate an employee incentive program. Now, it’s also possible that you may want to adopt this philosophy and want to hire better than average people. If you look at averages in the marketplace or medians in the marketplace, that represents average performing people or median performing people.
  2. The employee incentive program should provide the people you do have with more opportunity. We might want to provide them greater opportunity on the upside. If you have to raise base salaries, you may want to go the 60th percentile. And you may want to offer stock or bonus in the 75th percentile. Most of the research seems to indicate that exceptional – truly exceptional people can do almost twice the work as an average person.
  3. Another was is to put as much of the employee incentive program as possible into variable expense. It’s to the company’s advantage to have as much as of their total compensation expenses in variable expense. By variable expense, we’re generally talking about stock and bonuses or expenses – compensation expenses that go up and down with the fortunes of the company. If the company has not performed very well in one year, the employee incentive program should reward less. The problem with fixed expenses- primarily base salary is they don’t go down. The only way they go down is if you lay people off or you decrease your head count. With the use of variable expenses, you can provide more upside opportunity assuming that the individuals and the company perform well to pay out better than average on compensation.

Edited Remarks From “The 7 Deadly Sins Of Employee Compensation Plans (And How To Fix Them)” by Rick Olivieri

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