Dear Members, We are involved in strategic distribution management and want to pay incentives along with salaries to our support staff, such as those in admin, finance, and operations. I wanted to know if there are any basic rules for paying incentives. Do we need to draft a policy in writing before starting to pay?
Thanks,
Regards, Atul
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Thanks,
Regards, Atul
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Dear Atul K Verma,
Definition of an incentive
The definition of an incentive is "an additional payment (or other remuneration) to employees as a means of increasing output." While designing a policy, you need to decide first who is eligible for the incentives, the parameters of eligibility, who will maintain the records for the output, how it will be maintained, the method of calculation of the incentive, and how the disbursement of the incentives will take place. The policy must be communicated well in advance.
Purpose of incentives
By giving additional output, the employees bring additional revenue to the company and, in turn, additional profit. As a motivational gesture and also a tribute to hard work, companies share a percentage of the profit with those who brought additional profit. This is called an incentive.
Eligibility parameters
When deciding the parameters of eligibility, you need to identify the fixed output that an employee must give. If the employee exceeds the regular target, he/she becomes eligible to receive an incentive.
Implementation of the policy
Once the policy is designed, its meticulous implementation is also important. Occasionally, companies delay the disbursement of the incentive or even skip the payment itself. The non-adherence to the policy kills the spirit of the incentive, and employees develop distrust towards the top leadership.
Challenges in setting targets
I have seen a few companies keeping the regular target at such a high level that attaining it becomes a challenge. In such cases, getting the incentive becomes a distant possibility for the employees. It's better to avoid such crafty artfulness!
Thanks,
Dinesh Divekar
From India, Bangalore
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8072Definition of an incentive
The definition of an incentive is "an additional payment (or other remuneration) to employees as a means of increasing output." While designing a policy, you need to decide first who is eligible for the incentives, the parameters of eligibility, who will maintain the records for the output, how it will be maintained, the method of calculation of the incentive, and how the disbursement of the incentives will take place. The policy must be communicated well in advance.
Purpose of incentives
By giving additional output, the employees bring additional revenue to the company and, in turn, additional profit. As a motivational gesture and also a tribute to hard work, companies share a percentage of the profit with those who brought additional profit. This is called an incentive.
Eligibility parameters
When deciding the parameters of eligibility, you need to identify the fixed output that an employee must give. If the employee exceeds the regular target, he/she becomes eligible to receive an incentive.
Implementation of the policy
Once the policy is designed, its meticulous implementation is also important. Occasionally, companies delay the disbursement of the incentive or even skip the payment itself. The non-adherence to the policy kills the spirit of the incentive, and employees develop distrust towards the top leadership.
Challenges in setting targets
I have seen a few companies keeping the regular target at such a high level that attaining it becomes a challenge. In such cases, getting the incentive becomes a distant possibility for the employees. It's better to avoid such crafty artfulness!
Thanks,
Dinesh Divekar
From India, Bangalore
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Employee reference policy.doc