Most Employers Offer Pay Incentives, Shift Focus to Short-Term

short term incentive definition Most-Employers-Offer-Pay-Incentives-Shift-Focus-to-Short-Term

In May of 2014, pay incentives, primarily at the uppermost executive levels, have been seeing quite a bit of negative press due to push-back from shareholders over the size of the incentives, concerns over company performance, and even internal scandals and abuses to artificially inflate the incentive amounts distributed.

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Integrating Incentive Pay into Your Performance Management Process

When structuring an effective Performance Management process at any organization, including some type of incentive to help drive performance is a key step. Particularly in recent years, large financial incentives are not always feasible, nor are they always found to be the most impactful driver for incentivizing employees. Nonetheless, a consistently strong majority of organizations both across the region and nationally, tie pay to performance either directly or indirectly.

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Executive Pay: The Power of Indirect Incentives

In a PricewaterhouseCoopers study of 1,106 individual executives across 43 countries, researchers found ample evidence to suggest that the effectiveness of executive pay hinges not only on a total dollar amount, but also on several key intangibles. Despite much focus on variable pay as a key element of executive total rewards packages, the PwC study reports that as a performance driver, variable pay is only a part of the story.

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Over 2/3 of Local Employers Still Offer Incentives/Bonuses

The results of the 2011 ERC Pay Adjustment & Incentive Practices Survey show that the majority of employers are still offering an incentive/bonus plan. However, the percentage is down from the past few years.  

The survey reports that 67% of organizations surveyed have an incentive/bonus plan, compared to 79% in 2010 and 89% in 2007. Although this is the lowest percent reported in years, it’s important to note that the majority of respondents continue to offer an incentive/bonus plan.

The survey also shows that incentives including annual bonuses, profit sharing, spot-achievement awards, and individual incentives remain the most common incentives offered by employers. Gain-sharing, small-group incentive pay, and stock options continue to be less common.

Additional Resources
More info about this survey and other compensation surveys: click here

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