The Pros and Cons of Incentive Pay

By November 18, 2019 Newsletter

The Pros and Cons of Incentive Pay
It’s no secret that top talent expects to be paid top dollar. According to PayScale, 25% of employees said that compensation was their main motivation for quitting a job. Moreover, compensation is consistently reported as one of the top motivators for employees.

That’s where incentive pay can be beneficial. Incentive pay is a type of compensation awarded to employees for results achieved. One common example of incentive pay is commission, where sales professionals are paid a proportion of each sale they make.

Incentive pay programs can be designed in a variety of ways, but their ultimate goal is to encourage and reward employees for working hard and delivering results.

Incentive Pay Advantages

With incentive pay, employees who work hard to produce results will receive the compensation. As such, employees will be motivated to deliver results and go above and beyond in hopes of receiving incentive pay. Typically, productivity and employee engagement will increase too.

Incentive Pay Drawbacks

With incentive pay programs, there’s a risk for increased competition among employees that can lead to resentment and a cutthroat workplace culture. Additionally, as employees push themselves in hopes of receiving incentive pay, they may be putting themselves at risk of burnout.