Employee Incentive Plan is a special managerial mechanism used by organizations to promote or encourage specific actions, accomplishments and behaviors among their employees. These plans are also widely known as employee bonus plans or pay-for-performance programs. They are utilized to point the performance aspects which create the most of worth for an organization by arranging a system of tangible/intangible performance-connected rewards that are called to motivate employees. However, employee incentive plans cannot resolve many problems: they cannot compensate defects in management, they cannot compensate lack of leadership, and they cannot cause the wishful result to happen itself.
Employee Incentive Plan includes the following items:
- What positions are involved into the plan (who can be rewarded);
- What results are desired, why, and how the performers will be rewarded for them;
- If the reward is monetary, then what amount will be paid as incentive (how the incentive will be calculated);
- How the performance will be monitored and appraised;
- How the employee incentive will be delivered;