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Many companies have gone the extra mile to  please their customers. What’s the secret? Engaged employees.

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> Employee experience is a company-wide initiative to help employees stay productive, healthy, engaged, and on track. It’s no longer on HR project.It is now an enterprise wise strategy...
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> —Josh Bersin, Founder, Josh Bersin Academy

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Building an environment where employees feel safe, secure, and recognized is not a tough nut to crack. Yet, most companies fail to understand how to do it.

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One of the best ways to do this is by understanding what the employees genuinely want: Incentives.

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In this article, I'll tell you what an employee incentive program is and how you can implement it in your organisation to fuel your employee engagement.

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## **What is an employee incentive program?**

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Employee incentive programs are designed to appreciate and reward employees for their performance. Mostly, these rewards are focused on both monetary & non-monetary benefits.

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For example, 

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Your goal is to get 30 targeted meetings appointments every month. Your sales team hits the target and helps you get 50 highly-targeted appointments. When they are rewarded for achieving the business goal, you reward them wither offering an additional compensation over their base salary.

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### **Types of Incentives**

You can offer incentives in two forms: **monetary & non-monetary.**

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Monetary incentives include:

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* Commission-based
* Profit-sharing
* Annual-performance based
* Milestone-based

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Non-monetary benefits include:

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* Perks & benefits
* Skill development
* Recognition & awards
* Social media shoutout

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## **How can you build an employee incentive  program?**

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## **1. Define the Incentive Plan**

Whether you want to set up an individual, team, or organization-wide incentive plan — first, identify the type of incentive plan you want to implement in your organization.

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* An individual incentive plan helps if you want to scale the individual employee’s performance. It improves the productivity of slow employees and helps the organization achieve goals.
* A team-based incentive plan is based on the overall performance of the team members. The incentives are distributed equally to all the members based on team performance.
* An organization-wide incentive plan helps employees get incentives based on the success and profits of the organization. In this incentive program, employees get incentives based on shared profits, sharing gain, and employee stock ownership schemes.

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## 2. **Decode the formats of incentives**

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Decide the kind of incentives you want to offer to your employees:  percentage bonus, variable bonus, salary increment, shared profits.

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**Percentage Bonus:** Gives clarity to both employee and employer on budget and the incentive the employee will receive.

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On average, a 2% bonus is issued to employees on their high performance, but the percentage varies from business to business.

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**Variable Bonus:** When the business exceeds its goal and gains higher profits, the company can offer a bonus to employees based on the profits and the performance of the employee.

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**Salary increment incentive:** This is the percentage increment on employee'’ salaries, which gets fixed and the employee is paid the same additional compensation along with salary every month.

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**Shared profit incentives:** You give a percentage of business profits to employees based on quarterly or annual earnings. You can decide the percentage of profits you want to give to employees.

## 3. **Understand Your Budget**

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One question that comes up is, “how much should we be investing in the employee incentive program.” On average, employee incentive programs should take up [2% of organisation’s payroll](https://quickbooks.intuit.com/ca/resources/budgeting/small-business-employee-incentives/). However, there are organizations that extend their incentive program to 10%.

## **4. Personalize your Incentives**

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> Motivating employees to work at their potential is the main premise of successful management.
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> \-Eraldo Banavoc

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Make sure you understand what your employees want. Do they want a salary increase? Do they want to upskill themselves or go on a vacation?

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Take a survey and find out what your employees want. Then, create the incentive plan specific to them. Here’s the thing, employees love personalized experiences. If you don’t do it, your employees won’t make efforts even when they are being incentivised.

## **5.** **Make Understandable Incentive Plans**

An attractive incentive plan is easy to understand and identify by the employee and employer both. When employees understand the plan, they can calculate the benefits and determine their final payment.

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## **6. Lay Clear Policies**

The incentive policy should outline the benefits the employee gets. It should ‌‌tell how the employees will be paid and on what basis they are being granted the incentives.

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## **7**. **Study your Incentive Program Reports**

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Once the incentive program has been launched, track the performance of your employees. Running the incentive program can give you insights into each employee and how they perform.

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Maybe employees that you thought were not the best fit for the organisation perform well when offered a career development incentive. Or maybe your best-performing employees perform much better when you offer them a vacation incentive.

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Study the incentive program so you understand the KPIs and determine whether your goals have been achieved or not.

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## **How to Measure Success of Employee Incentive Program?**

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What according to you makes a successful employee incentive? Is it meeting scaling the revenue? Or is it improving the company culture? It could be anything and you need to find out your success metric.

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1. Determine the ideal outcome of the employee incentive plan. Your goals might include:

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* Improving employee performance
* Encouraging ownership in your organisation and improving company culture

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2. Once you have identified the goal, you can measure its success by aligning it with your goals. You must track:

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* Net revenue of the business
* Quota achieved
* Customer satisfaction
* Project completion

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## **FAQs**

## **Q.1 Is incentive pay a bonus?**

Incentives are tied to a specific goal while bonuses are not. Incentives encourage employees to work for future goals while bonuses are the reward for work done in the past.

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## **Q.2 How do you write an incentive program?**

First, understand your business goals. List them down and take feedback from your employees on the kinds of incentives they would like to receive. Compare the feedback to your company goals & budget. Choose the incentive options that align to your budget and test them out.

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## **Q.3 Is incentive pay taxed?**

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Incentive pay is taxable unless it is categorised as de minimus fringe benefit.

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