Performance Based Incentive Scheme In Software Industry

Hi Friends,

I represent a software development company with 70 employees. We are thinking of introducing a variable pay component that is linked simultaneously to project delivery (from a team perspective) and individual contribution. The scheme should ideally cover all our technical staff. It will be great if anyone who has implemented something similar can share the idea.

Thanks & Regards,
Robin Thomas

Robin, without automation, no variable pay scheme can be truly effective. Automation areas include 'Goal Setting & Tracking', 'Performance Appraisal', and 'Compensation Management'. If you are ready to invest, 'EmpXtrack' does offer a solution implemented by many. You may visit their website and study.

1. You may introduce fixed-to-variable ratio for various employee roles across the company.

2. As far as the variable part is concerned, you need to arrive at a business logic to determine the variable pay.
2.1 This could be based on contribution to projects (team) and individual performance.
2.2 Weightage should be defined for team contributions and individual contributions.

3. For measuring project contributions, tracking projects and various attributes such as completion, billing, support rating, and score is necessary.

4. To measure individual contributions, either appraisal ratings or time sheet fulfillment can be used.

5. Instead of paying on a monthly basis, it may be easier to administer the payout process by opting for a quarterly payout system.

Hi Robin,

How much pay have you decided upon? Pay depends on individual salary or a fixed amount that you have decided. A few months back, we also applied it in our company. I've shared some points; I hope it'll help you.

You may introduce two types of performance:
1. Measurable Performance
2. Non-measurable Performance

A. Measurable Performance: The following factors are measured according to your performance.
1. Number of billable hours in a month
2. Quality of work (in terms of bugs)

B. Non-measurable Performance: You can also add some points for non-measurable performance which show the interpersonal skills of employees.
1. Regularity
2. Initiative
3. Deadline
4. Leadership Skill
5. Teamwork
6. Improvement
7. Learning Ability
8. Loyalty
9. Dedication
10. Time Management, etc.

Regards,
Nisha Sharma
nisha4_sharma@yahoo.com