Incentive Reward Program

May 20, 2018 Marketing

The question of “how much does this job pay? ” comes easily to most employees however they sometimes fail to recognize the complex nature that compensation and benefit programs have within an organization. There needs to be a distinct balance between these two areas – addressing the needs of the workforce but at a reasonable cost to the employer. It can be unique, especially as the generations are requiring different benefits for different work/life styles.

Pay for performance is given to employees as a result of a good performance. As a Vice President of Human Resources, I have been given six months to design and implement a Pay-For- Performance: Incentive Reward Program for all employees including senior management. I was told to assume any details or ideas that I wish in order to support my incentive award program, knowing that it must seem fair and equitable to all employees. There is a strategic importance of performance –based pay because it helps organizations to reach their goals.

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When employees are rewarded fairly for meeting the desired objectives, those objectives are more likely to be achieved. When a company is highly profitable, it can share those profits using incentive pay. Incentive pay is a cash reward that is given in a lump sum amount to employees. Incentive pay should be fixed and not to be changed according to the fluctuation of profits. Performance-based pay is very important because it can influence applicants’ decision whether to apply and accept a specific offer.

By using this type of pay, the company can attract top talents who can contribute in the success and meeting objectives. Moreover, performance- based pay can influence employee decision on whether to stay or leave and it can motivates employees to give the best performance. In addition to the incentive pay, I am going to discuss other types of performance-based pay that are recognition, merit pay and earnings at risk. Pay-for-Performance: Incentive Reward Program Recognition pay is noncash rewards that are given to employees as a result of meeting the organization’s goals and objectives.

With merit-base pay, employees receive the pay regardless of performance and it is set at a market rate. With pay at risk, employees receive base pay that is below the market average but are offered incentives for good performance. Which Rewards to Offer? We should offer the rewards of performance that are valued by employees. Any company makes different decisions when choosing the amount of the base pay. The general pattern is that more incentive pay is used for employees who are higher in the hierarchy.

Any company should use some eligibility rules in order to determine who gets the reward. Eligibility rules differ from one company to another and it is affected by the company’s objectives. Generally, the better an employees’ performance, the more likely he is to be eligible for the rewards. In most companies, incentive pay is received from several weeks to a year after the performance being rewarded. Performance-based pay should be directly linked to specific performance measures.

Tom Siebel ( a former CEO of Siebel Systems, now a part of Oracle) :“We use the Score card system to ensure that our employees deliver customer satisfaction. For example, the incentive compensation of everyone in the company-the salespeople, the service people, the engineers, the product marketing people, everyone- is based on the satisfaction scores. ” Any company should monitor their performance using measures that reflects four domains: finances, customers, internal processes and employees’ learning and development.

Pay-for-Performance: Incentive Reward Program More steps should be used when designing an incentive program. First, there is a need to analyze the challenge and determine which incentive is appropriate. Second, it is very important to use a three-way classification of employee performance (e. g. poor, standard and superior). Third, it is very essential to protect employees when incentives are used because they have a number of reservations related to the use of incentives. For example, job loss, unfair pay and rate reductions.

Fourth, it is very important to improve communication with and between employees by explaining the program, provide feedback and be open for any suggestions. Fifth, a new incentive program should be reviewed periodically for potential modifications and improvements. Any changes in the incentive program should include the workers in order to maintain the trust that is so essential to the success of an incentive award program. Incentive pay program has the ability to increase employee productivity if it is well designed and maintained. At the end, I need to mention two issues in performance- based pay currently receiving considerable attention and I hope our company focuses on them. These are ethical issues and the global shift toward variable pay.


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