2021 Compensation Budgeting Forecast Part 2: Incentives, Bonuses, and Variable Compensation

Astron Solutions

On the bonus front, 76% of companies planned on awarding a bonus in 2021. Bonuses, which are generally tied to organizational and employee performance goals, are projected to average 11% of salary for exempt employees. Adjust long-term incentive mix.

Key Factors to Manage Employee Merit, Bonus & Incentive Plans Effectively

HRsoft

There are many ways to incentive performance in an organization. Typically grouped together under the umbrella term “pay for performance plans,” employers may choose among merit programs, bonus options, and individual or team incentive plans.

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Incentives and The Rule of Three

Compensation Cafe

Designing an effective incentive plan is always a challenge. Over many years I have come to rely on what I call the Incentive Plan Rule of Three. No more than three metrics (KPI), no more than three defined goal levels, no more than three incentive plans for any one individual. Three metrics gives enough room for differentiation, while also providing enough weight to each metric to ensure it has a measurable impact.

The Intent to Incent is Our Sun

Compensation Cafe

Incentive plans are one of the most complex aspects of pay and rewards. All of these simply orbit around the most important element of any effective incentive plan. The purpose of an incentive plan can only be absolutely clear if we avoid assumptions.

What Incentives Can Do, What Incentives Cannot

Compensation Force

Incentive compensation. Incentives are dangerous, and not just because people game them. Incentives are like that jet engine. Yet incentives are still the first resort of most managers, perhaps because they all think they’re smart enough to create the perfect carrot. How do you know when an incentive plan is a good idea and when it is not? . Next, you'll need to face up to the reality that there are problems which incentives cannot fix (and may even make worse).

Key Factors to Manage Employee Merit, Bonus & Incentive Plans Effectively

HRsoft

There are many ways to incentive performance in an organization. Typically grouped together under the umbrella term “pay for performance plans,” employers may choose among merit programs, bonus options, and individual or team incentive plans. In order to manage employee merit, bonus, and incentive plans effectively, however, it’s important to first understand the key differences among these types of pay.

Annual Incentive Compensation: A Complete Guide

Decusoft

Annual incentive compensation programs represent an enormous opportunity for motivating employees and executives to do their best work. What Is an Annual Incentive Plan? Long-term incentives can help executives maximize individual performance over not just months, but years.

Behavior Bonus: Performance Enablement

Kazoo

While the Kazoo Employee Experience platform is primarily driven by spontaneous, timely employee recognition — some employees want specific incentives and directions for their behavior. This is where our Behavior Bonus functionality comes in. Using Incentives for Performance Enablement. Behavior Bonus is, in its essence, an incentive tool. Each behavior bonus defines an action an employee can take that will get a specific number of points.

Annual bonuses: How much do they actually incentivize employees?

Achievers

Do you give your employees big annual bonuses as a reward for their work? If so, you have plenty of company: It’s common to rely on annual bonus plans to build employee motivation and pad salaries. However, a lot of bonus plans aren’t set up in a way that truly motivates good work. There’s a psychology behind rewards and incentives that you need to understand before you can create an effective bonus structure.

Why is Three the Magic Number for Incentive Plan Metrics?

HRsoft

The Rule of Threes states that there should be no more than three metrics involved with any incentive plan. But what makes the number three so powerful when it comes to incentive plan design? For one, having three metrics leaves enough room for differentiation, and enough weight for the metric to have a measurable impact. Conversely, with five or more metrics, at least one will be so low in terms of payout that it is essentially designed to be ignored.

Cafe Classic: Is it Safe to Incent Safety?

Compensation Cafe

Should rewards be used to incent greater attention to safety? Is it a good idea to include safety metrics in a broad-based employee incentive plan? I recently came across an interesting article in Incentive Magazine about safety incentives.

3 Reasons Why Metrics Go Wrong

Compensation Cafe

Sadly, in some areas over the years, that’s become twisted to focus on the metric and not the behavior or goal underlying the metric. Knowing where we stand and how we’re doing in working toward targets is important, but these metrics must never supersede the original reason for pursuing the target. If the original goal or target is providing good healthcare to help people live longer, healthier lives, then the metric has certainly supplanted the goal.

Singing, Dancing and Posing: Aligning Incentives, Performance Metrics and Strategic Objectives

Compensation Cafe

How clear is the line of sight between your performance pay programs, strategically linked performance metrics and the organizational strategy? Managers will receive bonuses tied directly to their survey scores. If managers focus solely on the metric, they exhibit what is known as surrogation. Unfortunately, using performance pay linked to a strategically linked performance metric increases managers' propensity to exhibit surrogation. Image courtesy of Electronic Arts.

Can Your Employees Make a Difference? What Does Your Incentive Plan Say?

Compensation Force

I am floored by how many times, during the design of an employee incentive plan, management will trot out the assumption/foregone conclusion that individual employees are unable to make a meaningful contribution to overall organization - or business unit - performance measures.

How to Design an Incentive Plan

Decusoft

Incentive Compensation Plan Design. ( See our infographic “Incentive Compensation Plan Design” ). Incentive programs are a critical component of a comprehensive executive pay policy. Incentive Plan Design 101. The incentive’s purpose.

Employee Incentives: Good or Bad?

AbelHR

One such benefit that has been shown to really catch the interest of employees is that of incentive programs. To start with the basics, employee incentive programs are any program designed to provide your employees with recognition and appreciation.

Incentive Plans Work Too Well (here’s the trick)

Compensation Cafe

It's not that incentive plans don't work well, it's that they can work too well in motivating unintended consequences. Are any incentive compensation experts shocked by this? The failed Wells Fargo incentive plan and Tax Reform are similar. The Tax Cuts and Jobs Act (PL 115-97) was sold as a type of prepaid incentive plan for corporations and individuals. The metric was “more accounts,” the goal was “eight.”

Cafe Classic: Is Your Incentive Plan Strategy-Negative?

Compensation Cafe

Editor's Note: Do you design incentive plans to undermine your organization's business strategy? In a "discovery" conversation with a leadership team, following a presentation of the company's strategy and most urgent business objectives, one of the executives was mapping out the principles and mechanics of their incentive plan on the whiteboard. What happens when you map your incentive plan out against the company's most pressing priorities and business goals?

Money for Motivation: How Incentive Based Pay Works

UpstartHR

We want to instantly think that we can drive performance or discourage behaviors through monetary incentives. Here are a few: Bonuses. Group incentives. The good thing about incentive compensation that is tied to performance metrics like sales or profitability is yes, you can afford it. You structure the incentives so that the growth in revenue/sales/profit/productivity/whatever-you-choose is enough to cover the cost of the incentive compensation.

Woulda, Coulda, Shoulda: An Incentive Compensation Story

Compensation Cafe

Not the least of them was the creation, design and management of the company’s long-term incentive program. She also combined all of these skills to build and manage her incentive compensation plans. This year the two main incentive plans did not perform as expected. They were obviously upset and immediately pelted Yolanda with questions and comments about the failure of the incentive plans. Not so long ago in a town not so far away, there was a growing company.

Long-Term Incentives for a Short Term Generation

Compensation Cafe

Second, this means that the majority of these workers do not intend to benefit from the entirety of their Long-Term Incentives (LTI). Designing LTI to attract, motivate and retain the “next” generation: Opportunity 1: Consider “Mid-Term Incentives” that link to Long-Term Incentives. For this newer generation of worker, create incentive plans that can build over time. Opportunity 3: Use diversity as an LTI metric.

What Is Short Term Incentive Administration?

HRsoft

Short term incentive administration refers to the awards given in a time period of up to one year. Which Outcomes Do Short Term Incentives Support? Metrics like revenue and operating incomes are typically the basis for short term incentives.

Incentives Without Teeth

Compensation Cafe

The title of this post probably had you thinking about incentive plans that required real goals to be met before payment was earned. Many companies have incentive plans without links between individuals, teams, departments and the company as a whole. When you evaluate the success of your incentive plans during this year pay special attention to understanding and documenting how each plan, metric and goal is helping or hindering the success of those around it.

Cafe Classic: Reviewing Your Incentive Plan: A Three-Tiered Conversation

Compensation Cafe

Editor's Note: Reviewing existing incentive plans is part of the job for many of us. One of the temptations we encounter is to try to benchmark our way into the right plan structure and metrics - looking externally at so called "best practices" in order to figure out our next design move. Many of you are - or will soon be - in the throes of reviewing your employee incentive plan, trying to determine how (and in some cases. Incentives/Bonuses

Employee bonus programs: What’s right for your company?

Insperity

If you think your business is too small for an employee bonus program, consider these two questions: Have you noticed less productivity or a decline in employee morale? A meaty bonus program could do the trick. But, before you hit the ground running, take a moment to dive into what kinds of bonuses are out there, as well as what goes into creating a bonus program. Employee bonus program basics. First things first: How are employee bonuses defined?

7 Free Team-Building Ideas for Your Corporate Incentive Programs

Kazoo

But corporate incentive programs often recognize individual contributions more than teamwork. So how do you design corporate incentive programs that both encourage individual performance and build team spirit? This study on prosocial bonuses showed that teams perform better when members get to reward each other compared to when management just rewards individuals directly. Dedicate 50% of your corporate incentive programs to team recognition.

Ensuring The Success Of Your Channel Incentive Program

Workstride

Organizations that go to market via indirect channels tend to understand the value in having a channel incentive program to motivate sales representatives, partners, or dealers. The objectives you set for your incentive program should focus on both quantitative and qualitative measures. Many companies rush to develop an incentive program because their competitors have one in place. Incorporate training as a qualifier to participate or as a bonus.

9 Ways to Create the Best Possible Employee Incentive Options

Kazoo

As an employee incentive, cash isn’t king. As part of Kazoo’s research on rewards and recognition systems that work, we uncovered how to make employee incentives effective. Here are nine ways to create the best possible employee incentive options at your company. A sincere thank-you presented with an employee incentive lets an employee know exactly what they’ve done that you value. There is no one-size-fits all employee incentive.

Promotions, Bonuses, Raises, Recognition - When They Work (and When They Don't)

Compensation Cafe

You can’t give all employees promotions, bonuses, or raises. Bonuses. Bonuses are a deeply embedded part of the compensation plan in many companies – especially at this time of year. The structures of bonus plans are too numerous to detail in a short blog post, but they are generally viewed as an additional means of compensation, often tied to some kind of achievement metric (company, team or individual results or outcomes, usually).

5 Employee Incentive Ideas that Boost Employee Motivation

Kazoo

Finding employee incentive ideas that boost talent recruitment, retention, and development is like finding a golden ticket for business success. Yet most traditional employee incentive plans don’t work for longer-term employee retention or talent development. Motivation-Boosting Employee Incentive Ideas. Tie Incentives to Spontaneous, Real-time, Specific Recognition. How many employee incentive ideas offer that?

Bonuses Remain the Top Priority for Raising Compensation

Compensation Today

While companies may not be raising salaries as progressively as desired, they are turning to other means to increase the compensation for their most-deserving employees by offering bonuses. Are employee bonuses the new compensation strategy? In other words, employers are more likely to be basing their overall compensation on performance metrics rather than on job titles and other non-essential factors. Will more employers offer bonuses? Tess C.

Cafe Classic: Is it Safe to Incent Safety?

Compensation Cafe

Editor's Note: Continuing our end-of-summer Classic week here at the Café with the question "are incentives equally applicable to -- and appropriate for -- all areas of human endeavor?" . I recently came across an interesting article in Incentive Magazine about safety incentives. gift cards, shirts), I think the discussion also has relevance to the world of cash incentives, where the issue of incorporating safety behaviors and outcomes can be a sensitive one.

Best of the Force: In a True Talent Partnership, Value Creation Should Drive Incentive Design

Compensation Force

I'm convinced that the only way to create smart, sustainable incentive compensation plans is to tie them directly to value creation. This means that the money to pay earned incentive awards comes from performance improvements, improvements which generate financial results and are driven by the plan design itself. That doesn't mean, however, that incentive plans should necessarily be built entirely on financial performance metrics.

Best of the Force: In a True Talent Partnership, Value Creation Should Drive Incentive Design

Compensation Force

I'm convinced that the only way to create smart, sustainable incentive compensation plans is to tie them directly to value creation. This means that the money to pay earned incentive awards comes from performance improvements, improvements which generate financial results and are driven by the plan design itself. That doesn't mean, however, that incentive plans should necessarily be built entirely on financial performance metrics.

Using Incentive Compensation Software to Drive Performance

HRsoft

Incentive compensation is the process of paying employees based on the performance of an entity. For this reason, many organizations have increasingly turned to incentive compensation software. Here, we take a closer look at incentive compensation, as well as the solutions your company can implement to administer it effectively. Incentive Compensation Examples. based companies pay executives and employees incentive bonuses based on performance measures.

3 Practices for Effective Bonus Administration

HRsoft

When executed effectively, bonus administration can incentivize improved performance. However, mastering bonus pay isn’t always easy. For this reason, we’ve gathered a few helpful tips to help you ensure you’re planning your bonuses to make the best possible impact on your workforce. Every organization is different, so the bonus program that works in one company may not be ideal for yours. What outcomes do you hope to achieve through bonuses?

A Fresh Look at the Metrics in Your Management Incentive Plans

i4cp

Professionals in the human capital space are often confronted with questions about business performance metrics, especially when it comes to plan design for short-term and long-term incentives. More concerning is the likelihood that most managers don’t have a clue how to personally impact those results—bringing into question the whole notion of incentive. Boards of directors that reluctantly approve bonus payouts, when they know darn well the goals were sand-bagged.