Signature Block Incentive Plan Made Easy

Signature incentive plan

hello i am cherie pig-out and this is my final presentation for human resource management and i will be covering company incentive plans what are incentive plans well they're also known as variable pay programs because they are not fixed pay like someone's salary or hourly wage and they vary based on some type of performance plan they can consist of bonuses incentives and recognition to employees incentive plans reward employees for continued contributions to the organization so both organization and the employee come out as winners there are three types of incentive plans individual plans group plans and enterprise why have incentive plans well there are lots of benefits around them one they align employee efforts with organizational goals objectives as I mentioned earlier it could be a win-win situation because both the employee and the employer can come out as winners as long as everybody works hard to meet those objectives it's flexible vs. fix pay again it's considered variable so that it the paid an employee can actually earn more pay on top of what they have if they achieve specific goals and objectives it is the pay for performance based on achieving the goals and objectives so it doesn't encourage employees to work even harder because then they'll be compensated for that extra effort if fosters teamwork and cohesiveness especially if there are group and set of plans so it really does encourage them to work harder together to achieve that goal it distributes success so everybody feels like winners when they obtain their goal and they're compensated for it it increases equity and justice at the company so employees become more accountable for their work and take more ownership in the work as assigned to them and so they can meet those goals an incentive plans are known to attract and retain top performers so not only you does it help retain those top performers it helps them continue to be top performers and it can also help with people who aren't top performers who are getting by if they're seeing benefits that others are getting meeting their incentive plans then that can encourage them to work just as hard as well how does a company implement a successful incentive plan they should identify key organizational metrics that encourage employee behavior this way based on what organizational objectives there are then you can go ahead and then make specific targets within the incentive plan and so they need to be in line with what the company goals and objectives are they also need to be measurable you know specific goals that's very clear that an employee can understand I'm involved employees the incentive program should seem fair to employees a they need to be seen as attainable goals not something that's impossible to achieve or it can affect their morale find the right incentive payout payoff formulas should be simple for employees to understand this way they can monitor you know based on my performance I'll be paid out this much or I understand how how my performance will be measured to determine what my payout will be establish a clear link between performance and payout you know employees need to understand this is the reward is not an entitlement it is based on the extra effort that they put in and what they achieve in order to receive pay and have continuous communications to the employees if they're going to be any changes or improvements to the plan they need to understand that they also need to have a way to ask questions in case they don't understand something or a minute clarification on their objectives or on the pail plan the most important thing to help a company have a successful incentive plan is that employees must believe in it in order for them to believe in it they need to understand it the company needs to properly promote the incentive plan there needs to be excitement put into the employees so that they'll work hard to achieve what those goals are set out for so every incentive plan that a company has as mentioned earlier should have clear objectives for the employees and the perform the objectives and their performance need to be measurable in order to be able to calculate you know but achieved and how they'll be paid out and there are certain views and films for round measuring ones performance and it there's actually examples of dues for all the incentive type plans so you have individual group and enterprise now if you're measuring individual performance you want to make sure that is quantitative and you're measuring simple work so it's Clute you know so an employee and understand what they're going to be measured on and do you measure work you know independent of others contribution so if Lily affected some you know her work was delayed and affected Elizabeth's output then you shouldn't you know measure that piece of it if it's group then do measure the group interdependent work because you know they'll be measured as a team and if it's enterprise then be sure to measure you know the organization's interdependent work which could probably involve like different departments and how they affect one another and results that employees can control you know if it's if there was some type of issue because of you know something you know done above at the executive level that shouldn't impact an employee's performance payout and then across the board for all three plans you should be measuring you know the relationship between work and performance because the incentive plans are you know pay for performance payouts some examples around what not to measure you know for individual plans it shouldn't measure based on preferences so you know don't measure you know based on who you like and dislike cake you know don't consider you know personalities political preferences don't measure without considering contributions of peers now within a group plans don't measure without considering contributions of other teams you know what another team how another team may have impacted the team that you're measuring and don't measure unless there is a mechanism for teams to discipline slackers you know if there is a team incentive plan and someone's not doing their part there needs to be some type of performance management around that and then an enterprise you know don't measure and less employees can see how their work actually contributes to the enterprise again you know when you have an incentive plan employees need to understand how the performance will be measured and calculated they need to understand that formula for payout and don't measure without considering the effects of the environment you know is there an economic downturn right now is there a change going on to the for the companies being sold I mean that type of scenarios could impact overall performs calculations and can affect the employees payout so I think this is the fun part is learning about the different incentive plans and so the first type are individual incentive plans and there's a variety of them one example is a piece work incentive planet and there's actually two types you have your straight um your straight piece work and so basically basically it's unless say you have people who make furniture and they will be paid a certain amount for each piece of furniture they make so for every chair you make I will give you ten dollars um so obviously the more chairs they make the more money we're going to make then there's also a differential piece rate and that's typically you know somebody has a baseline of chairs if any and then for every chair on top of that baseline they'll earn extra money so if somebody needs to make 30 chairs a day and receive $100 and then for every additional chair they make over 30 they'll earn another hundred dollars and that'll push them to you know produce more in a day then you have your standard our plan um so this is let's say it works well with mechanics and probably construction efforts but if someone says all right um it'll take me five hours to you know fix this car that migrated to you is going to be five hundred dollars and if you can finish it in three hours I'm still going to give you five hundred so that's a huge incentive for somebody to finish their work a lot quicker but you know quality still needs to be looked at as well then our bonuses which are very popular so that's basically earning additional money on top of your your current Saxum salary or hourly pay um so let's say an employee has certain goals and objectives they meet they can earn a 10% bonus on top of their salary there's also spot bonuses so you know if a manager feels that their employee did a great job on that project hey I'm going to give you a $1,000 bonus on the spot then there's merit pay um so these are basically you know your your raises a lot of common ones for annual raises but I'm trying to see this less and less than companies especially if they're you know not financially capable of doing it um so it does you know it offers there's pros and cons from about merit pay you know if an employee has specific goals and objectives that they need to meet and they really want to get that pay increase then yeah it'll it'll help them take more accountability and work harder but once you get that let's say you you give the employee the merit pay and now that that actually affects their fixed pay right it's no longer flexible now they're going to earn that higher pay rate for the next year or whatever it may be but what happens if the performance comes down right so they they did great to earn that pay increase and then you know three months after they get the increase if there's issues going on and so you're paying them at that higher rate still but yet their performance didn't stay on top and didn't continue to grow and there's awards and recognition so you know a lot of companies have an employee recognition program um you know like a monthly employee or best customer service rating and so these employees are recognized and a lot of times our cash rewards for that this could be done you know recognize them in group settings where you Monk your team or individually and then there's sales incentive plans um you know for your sales staff and there's three kinds that can be used one is a street salary plan so you know you can pay your salesperson you know a certain salary and you know which includes everything they have to do they don't have to worry about not making a consistent pay on a regular basis um because times are tough then you have your straight commission plan come in services people who get paid um specifically around their sales volume so the more they sell and make money for the company the more they're going to make as well the most common one that I've seen a combined straight and salary and Commission plan so salesperson could earn less a fifty thousand on a temporary sale boom they make they'll earn you know twenty five percent commission off of each sale so they not only have a base pay but then they also make additional income for for the sales volume so next there are a group incentive plans and the first one or one that can be developed is team compensation so basically um a whole team on the team members will be measured on together to achieve a specific goal and objective when developing a team compensation incentive plan there are three things that need to be considered or done first you need to set the performance measures what exactly is this team going to be measured on and it should be tied somehow to company objectives so let's say that company is trying to reduce um recruiting costs and so you know the team is going to use different measures when they're recruiting a new personnel then what's the size of the incentive bonus that needs to be determined so let's say that team um is able to save on ten thousand dollars in recruiting costs for specific time period they need to know you know what that bonus is going to be so the team will be paid you know will earn 10% bonus on top of the the savings that they were able to make and then third a payoff formula is established and it's communicated to employees so every single team member needs to understand how they will be paid out yes there's a 10% bonus for no cost savings around recruiting but you know what does each person on that team earn is it split out equally across everyone is there a lead who'll earn a little more than the rest of the team was you know is there a part-time person there he'll only receive a percentage so each team member needs to understand what their formula is and how will be how they'll be paid out the next type of group incentive plan is gain sharing and this again sharing plans involve both employees and the organization um to have a common goal and then based on meeting those objectives then there's a formula put into place to determine how employees will be paid out a lot of it is you know company wants to save pause around a certain objective and the employee you know the base on the overall success of that you know if there's a certain amount of savings involved and then employees can be paid out based on those savings but how it's how the performance is measured is based on output simple inputs and outputs of that objective so for example um some examples of outputs are you know items that are produced total standard costs you know the number of customer orders inputs are basically the resources to take to develop those outputs so you're you need to consider the cost of employees materials and inventory no goods that or services are purchased to help produce what your outputs are going to be and so two common goals around game sharing is you have more output with less input because obviously that means that comfort will make more money um and then or you have equal production output but it took less input to get that output again the company will save more money so based on the total savings um you know between the input and output then employees you know there'll be a formula so that employees will earn some type of bonus around that there are two examples of gainsharing incentive plans and the first one is called the Scanlon plan and Scallon plan involves both employees and management committees to determine what the cost reduction improvements are going to be and with the Salomon plan employees are really encouraged to offer their own ideas and suggestions on how to improve productivity and how they'll be rewarded for their efforts another example of a gain sharing incentive plan is impro scare and this is based on the overall productivity of the work team you know the output so um basically impress your bonuses um it depends on you know how much productivity did the team improve overall it's not just based on one employments productivity but the whole team if they were able to produce more output on they'll be paid out on based on that total output now we move into enterprise incentive plans and I like this type of incentive plan because it involves everyone in the organization who will participate in the compensation count so it really feels you know that it's important an incentive plan is seen as to be fair by employees so you know everybody's rooting for the company to be successful because the more successful the company is then everybody is going to share in that wall and that's success so yeah it's based on the organization's success over specific time period and that can usually be within a year so if the company is doing well then there's an enterprise incentive plan then the employees can look forward to being rewarded as well and it creates a culture of ownership um it really encourages teams um to work hard together because everybody wants to see the company thrive and do well and there are three types of enterprise incentive plans the first is profit sharing plan so if the company has a certain amount of profit and they will share a certain amount to their employees across the board and I mean there are special formulas around profit sharing as well um so maybe depending on someone's grade level you know they'll earn certain percent um and then you know something at a higher level of may earn a higher level posess percent then there are Spock options so a company can actually have a window in time where they offer their employees the opportunity to purchase Company stock at a fixed rate and it's usually at a discounted rate and that only happens during a certain amount of time and this can help employees feel like you know they they have some ownership in the company and they feel more tied to the company and it's going to make them you know motivate them more to work harder and achieve their own goals and then there's the employee stock ownership plan which are also called es o P so instead of employees purchasing stock the company actually uses their own stock with their own funds to hold stock and let's say an employee's account that they'll earn over time and then if an employee does leave then they're able to take that stock option with them as well company incentive plans are a real crucial thing to have especially if you know you really want to push your workforce to participate in the overall company's success and feel like that eight big come out ahead as well you know it really helps with employee morale job satisfaction and bottom line retaining your top performers and if a company is able to implement incentive plan successfully then everybody comes out as as winners