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HR Glossary

HR terms frequently used by HR professionals.

Incentive compensation 

What is incentive compensation?

An incentive compensation plan offers employees cash or non-cash compensation on top of their base salary. This type of plan is formulated to motivate employee performance or the accomplishment of a targeted achievement.

Why is incentive compensation important?

There can be various reasons employees might not be motivated or enthusiastic about coming to work. Employees may lack opportunities, face boredom, or feel they are receiving insufficient benefits. Acknowledging such reasons can boost employee motivation and increase the company’s productivity. Monetary incentives and rewards excite employees, making them feel appreciated. Overall, incentive compensation improves morale and helps organizations in achieving their goals.

What are examples of incentive compensation?

Incentives to motivate employees include:

  • Recognition
  • Rewards
  • Referral programs
  • Health and wellness benefits programs
  • Bonuses
  • Gift cards

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