Incentive Pay
Variable pay designed to motivate and reward specific performance, results or behaviours.
Incentive pay is remuneration linked directly to achieving defined outcomes — sales commission, performance bonuses, profit share or long-term incentive plans, for example. Its purpose is to motivate and reward desired results.
Well-designed incentives align individual effort with organisational goals and can drive strong performance, but poorly designed ones may encourage the wrong behaviours or short-termism.
Clarity is vital: employees should understand exactly what triggers a payment, how it is calculated and when it is paid.
