Exploring Incentive Pay
1 Explore the incentive pay approach.
Incentive pay or variable pay rewards employees for partially or completely attaining a predetermined work objective. Incentive or variable pay is defined as compensation, other than base wages or salaries that fluctuate according to employees’ attainment of some standard, such as a preestablished formula, individual or group goals, or company earnings.1
Effective incentive pay systems are based on three assumptions:2
Individual employees and work teams differ in how much they contribute to the company, both in what they do as well as in how well they do it.
The company’s overall performance depends to a large degree on the performance of individuals and groups within the company. ...
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