Incentive salary is a part of the salary system, which is paid to encourage employees to take specified actions, and can be understood as bonus. This does not happen every month, but depends on the behavior of employees and the company's incentive plan.
Difference of incentive pay
1. Incentive salary affects employees' future behavior by paying salary; Performance pay focuses on recognition of past work, that is, different time.
2. The incentive pay system has been determined before the actual performance is achieved. On the contrary, the performance pay is often not known to employees in advance.
3. Incentive salary is a one-time expenditure, which has no permanent impact on labor costs. When the performance declines, the incentive pay will also automatically decline. Performance pay is usually added to the basic salary, which is a permanent increase.
Incentive compensation, also known as variable compensation, incentive compensation or performance compensation, refers to the part of compensation income increased after employees reach a specific goal or performance level or create a certain profit. It is the compensation paid to employees or groups based on the short-term or long-term performance of employees, teams or organizations. Compared with basic salary, incentive salary has certain variability. The premise of executive salary implementation is performance appraisal, and incentive salary is closely linked with performance. Therefore, it has a stronger incentive effect on employees.
The form of incentive compensation includes short-term incentive compensation such as bonus, and long-term incentive compensation such as equity, options and profit sharing. Incentive pay has a great impact on employees' enthusiasm. Since incentive pay is an additional payment, and it is not universal, when incentive pay increases, employees' enthusiasm will generally increase due to incentives.
According to different classification methods, incentive compensation is generally divided into:
(1) Individual incentive compensation and team incentive compensation. Individual incentive compensation is mainly paid based on individual performance of employees, mainly including piecework system, time system and performance pay. Team incentive compensation is paid based on the performance of the team or organization, mainly including profit sharing plan, Scanlon plan, Rukal plan and stock ownership plan.
(2) Short term incentive compensation and long-term incentive compensation. Short term incentive compensation is related to a project or a time bound goal, such as performance pay and profit sharing; Long term incentive pay focuses on the overall and long-term benefits of the organization, and is made for the organization
