Incentives Plan

Incentives Plan

Introduction

In pursuit towards yellow bricks road, a corporation must have a quality and productive human resource. Therefore, corporations constitute competitive incentive plans in order to retain the human resource and to achieve their corporate goals and objectives. Performance of the individuals should be one of the evaluation criterions for the incentive plan, and employees must know what it takes to earn the incentive payout (Franke, Robert, 2000).

Discussion

Incentive plans

The incentive plans, which we also pronounce as “Performance Incentive Plans” (PIPs), inspire the employees to surpass potentials and grow the business. Incentive plans uphold outstanding performance in the employees. Through competitive incentive plans, corporations are able to fascinate potential employees to them and embolden corporate loyalty.

Types of incentives plans

The following is some types of incentive plans.

Employee stock ownership plan

Merit pay/raise

Profit sharing plan

Stock options

Profit sharing plan

The profit sharing plan is one of the incentive plans available to the full-time employees. Profit-sharing plans have got a tendency to offer the most substantial contribution in the pay of employees, averaging 9.4% of pay (PSCA, 2006).

Similar to the profit-sharing plan is 401 (k) plans. Both the plans share characteristics to a significant extent. Happy with profit-sharing plan, Mr. Pam Toussaint, Manager, Benefits Delivery, at Chicago-based Ameritech states, "It's a great program. You would have a hard time finding another investment where you could get an instant 75 percent return on your money."

For employers' prospective, profit-sharing plan allows building strong, trust-worthy and enduring relations with the employees (Anonymous, 1995). The objectives of this plan include employees' retention, improved business performance, and enhanced employees level of dedication and determination.

According to David L. Wray, president of PSCA; the profit-sharing plan has had employees' inclination towards it, because it makes employees assume more control, freedom and most importantly, a good return on their investment. Gain-sharing is one of the several ways to inspire the employees to do a better job, and it is also helpful in the cost reduction (Mason, Julie, 1991).

Like all the above mentioned possible pros, the profit-sharing incentive plan has certain cons too. The profit-sharing incentive plan holds all of the features of a bonus plan (one of the types of incentive plan) and practically has had none of the features of an effective incentive plan. One of the reasons being so is the fact that it is deferred, therefore, at times it gets inappropriate for the new employees. Another massive reason is that since the ...