Offering work incentives is a practice with decades of application. It is the right complement to the salary package and a technique to retain valuable human resources.
The types of incentive plans are part of strategies to retain key personnel seen as representing savings in terms of investment of time and money that entails the replacement of personnel and recruitment, screening, interviewing, and training.
We must make clear the difference between an incentive and a bonus, although the latter may be part of an incentive program. A bonus is a reward for achieving a goal, that is, the reward for a past action, while the incentive encourages future performance.
An incentive plan can be made up of many types of elements. The most common types of incentive plans used by employers is a monetary reward. However, there are other ways to inspire employees to act beyond the call of duty.
What is An Incentive?
An incentive is a material or immaterial stimulus, which is offered or perceived as motivation, to achieve a result that becomes a desire or needs for the incentivized subject.
It can also be considered as a prize or a profit after achieving something; that is, it is something that motivates the person to do better or faster a certain action.
Incentives can be used in different fields and disciplines (education, psychology, therapy ,etc.)
In this field they are also widely used, especially to achieve an increase in the performance of the person, as well as in his productivity.
In other words, they are aimed at achieving better results in the organization, in addition to an improvement in the well-being or satisfaction of the worker and a better work environment.
Characteristics of Incentive Plans:
Work incentives can be of various sorts, as we will see later. Be that as it may, they all offer similar objectives: to improve the presentation and profitability of laborers, just as their own fulfillment inside the company.
This fulfillment will convert into an expansion in your inspiration and will make you come to work cheerfully; All these interests the company, on the grounds that, from one viewpoint, it is searching for the prosperity of its laborers, and on the other, it is taking a gander at the business. At the end of the day, the two gatherings win.
Then again, not all incentives serve a similar route for all specialists; that is, it relies upon which laborer, one incentive will be powerful and another won’t. Hence, while one laborer might be happy with a pay raise as an incentive, another will be happy with more get-away days, and another with increasingly social advantages, and so on.
At the end of the day, every employee will profit by one of the different incentives to persuade themselves and increment their profitability at work. That is the reason the business or the Human Resources proficient must realize how to identify these various needs and inspirations in their staff, so as to have the option to dole out to every specialist the sort of incentives that are best for each situation.
Types of Incentive Plans:
You will get to know here a list of 7 types of incentive plans that can help you get started on the road to increased productivity, efficiency, and maximizing income thanks to the highly incentivized staff.
1. Profit Sharing:
A profit-sharing incentive plan payable at the end of the year can impact many operational and logistical aspects of the business throughout the year if you approach it appropriately.
For this, it is necessary for employees to raise awareness about the factors that affect benefits, such as higher sales turnover, adequate collection, productivity in each area, reduction of task times, minimization of waste and the conservation of resources all in order to reduce general expenses.
When the year ends, determine a percentage of the earnings that can be paid to employees as a reward for helping the company achieve its profit goals.
2. For Health:
Another non-cash work incentive is the health and wellness programs. Under the motto “healthy body, healthy mind” you can promote the health of your workers with discounts on memberships for gyms, classes in some sports discipline, as well as the organization and promotion of participation in community sports activities.
Furthermore, you can promote awards, raffles, entertainments in this type of activity with a view to increasing the degree of participation. Remember that healthy and motivated employees will perform better and take less time off their jobs.
3. Flexible Shifts and Leave From Work
The days when employees left voluntarily or involuntarily can sometimes be a problem for employers.
To help reduce intentional absenteeism, offer an additional vacation day or days off for each month or quarter in which the employee does not miss work. According to goco.io, extra days off are highly desirable as a form of incentive.
Schedule flexibility and telecommuting are also non-cash incentives that you can consider among the highest-performing and continuously performing employees.
4. Providing Bonus During their Payment
Seen from the incentive scheme, for a bonus plan to work, it is necessary to establish goals that employees believe they will achieve. The definition of the goal must be ambitious and feasible.
Before creating a bonus payment incentive program, run metrics in the areas or departments you’re looking to give the incentive to.
For example, if you want to offer an incentive to the collections department, analyze how many accounts receivable are successfully recovered in an average month, then base the incentive so that the expected result is above average. Employees should feel that the incentive is achievable to make it work and not think that they will be penalized if they don’t reach the incentive marks.
5. Incentive Plans for Loyal And Old Employees
For employees with broad experience within the company and commendable work, can offer shares of the company as incentives, rather than paying cash rewards punctual or occasional.
Be sure to discuss your stock incentive plan with securities regulators to keep your plan in accordance with the law.
6. Incentive During Retirement
Instead of paying an incentive directly to the employee, you can offer to add it to the employee’s retirement account instead.
According to the Internal Revenue Service, a company that sponsors programs can claim the cost of doing so as a deduction on its federal taxes.
The employee has the added advantage of tax-free dollars in his retirement account, beyond what the employee contributes and what he reconciles with the company.
7. The attraction of Talent
However, the purpose of incentives goes much further, and they can also be very useful in attracting good profiles to the company. In addition to attracting them, they will also serve to retain them, and that the staff is competent.
But due to the pandemic COVID-19 crisis, the companies now consider working on new types of incentive plans by:
- Manage accounts receivable, collect as much as possible of the outstanding portfolio through strict collection policies and/or incentives and discounts.
- Accelerate income through packages, incentives, discounts, and/or prepayments.