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Use these 7 rules in introducing effective incentive schemes

by , 21 December 2015
Performance rewards and incentive schemes are intended to reward exceptional performance within your business.

Now, when introducing performance rewards and incentive schemes, there are 7 rules you must apply...


An incentive scheme, achievable and quantifiable objectives which have been agreed upon.

For example:

·        Increase the turnover by 10%;
·        Reduce absenteeism by 15%;
·        Increase the amount of academic qualifications by 20%; and
·        Reduce customer complaints by 20%; etc.


It should be affordable. In other words, the incentive awarded should not be more than what's gained by the effort.

Instead, determine what's to be gained by the effort and set aside a portion for the incentive.

For example, if R300 000 is gained from the effort, DON'T pay more than R300 000 in incentives (unless you have other reasons to do so).
Keep reading to see what the other rules are…

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Article continued…


It shouldn't put the company at risk, whether it be financially or otherwise.

This could apply if there's a drop in the economy, don't commit to paying out incentives.


It should be reviewed regularly.

For example, if workers are awarded based on monthly performance, then reward them during the following month.


There should be clearly laid-out rules for the scheme.

For example:

·        Incentives will only be paid out for performance criteria which the employee directly contributes towards; and
·        Incentives won't be paid with other guaranteed bonuses or at the same time as annual increases; etc.


It should specifically state who'll receive it. For example, individuals, groups, departments and/or whole teams.


It should clearly lay out how the amounts for incentives will be determined.

For example:

·        Percentage of profit; or
·        Percentage of sales; etc.
*Would you like to know what the other 2 rules are? Then subscribe to the Practical Guide to Human Resources Management today.

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