Incentive Plan

An effective employee incentive program is necessary for business to remain competitive in day and age. Many companies spend a great deal of money on their retention strategies, which concentrates on various ways to instill loyalty among employees. A great way to ensure low employee turnover is to offer higher pay, but higher pay does not always guarantee employee alignment with the company’s priorities. In order to encourage this alignment, an incentive plan should be implemented.

It is important that employees knows the connection between their performance and their would-be payout. An effective incentive plan sends clear messages about what is important to organizational success. It also motivates employees to engage in ongoing improvement activities, and provides them with a stake in the business (Smith, 2007). It is truly an exceptional vehicle for continually communicating how the company is doing with respect to strategy execution and financial performance. This will be an invaluable asset in calming the crew and keeping them focused on the important task of running the business.

More people than are willing to admit, lives revolve around their paycheck as its after-tax amount determines the quality of life they will have. “Statistics shows that by attracting and retaining employees through higher wages, organizations actually reduce costs through decreased turnover, lower absenteeism rates and increased productivity and profitability (Duchan, 2007).” Therefore, by offering a competitive base salary will make an organization more attractive to the more qualified employees. Some employees will come with more experience and education than others, salary is competency based. Salary will increase yearly depending on performance appraisal of individual and department. Lastly, a bi-weekly pay schedule should be utilized, as it serves as an incentive as well because two times a year there are months that have more than 2 pay periods; some employees deem the extra check a bonus.

Benefits Plan
A great benefits plan can attract, retain and motivate key talent but can be very costly for companies to provide to employees, “so the range and choices of benefits are changing rapidly to include, for example, flexible benefit plans (Smith, 2007).” According to the U.S. Chamber of Commerce, “employee benefits now constitute approximately 40.7 percent of wages and salaries. A company should contain 80% of the costs of the benefits package; this package gives employees a choice on the benefits they wish to receive. This approach is a win-win for the employee as well as the company.”
Benefits are a form of value, other than payment, that are provided to the employee in return for their contribution to the organization, that is, for doing their job. Some benefits, such as unemployment and worker’s compensation, are federally required. Worker’s compensation is really a worker’s right, rather than a benefit. Examples of benefits are insurance such as medical, life, dental, disability, unemployment and worker’s compensation; vacation pay, holiday pay, and maternity leave, contribution to retirement or pension pay, profit sharing and stock options

Incentive plans are designed to shows appreciation in a way that salary pay, no matter how large, does not convey. “An incentive plan that is well-designed incentive can pull employees together, assist in pointing them in the direction management want them to go, and give that extra push that every company needs in today’s competitive environment (Duchan, 2007).”

To ensure that an incentive plan is effective, it is important that a company consider the following factors: recognize that the business strategy process is an ongoing cycle of formulation, implementation and evaluation; therefore, these incentive plans should be tweak and fine-tune on a regular basis (Smith, 2007).

Duchan, M. (2007). Compensation: Total Reward Plans that Attract, Retain and Motivate. Retrieved April 26, 2009, from Business Owner Web site: total-reward-plans-that-attract-retain-and-motivate.html
Smith, L. (2007). Designing an Incentive Compensation Plan. Retrieved April 26, 2009, from
HR.Com. Web site:
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(n.d.). Fighting For Your Business. Retrieved April 26, 2009, from How Do Your Business
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