Q & A – How do I create an incentive plan?

Q. How do I create an incentive plan?

 

A. Incentives are designed to drive and reward behavior in order to reach certain company goals.  They must be carefully considered so as to actually reward the behavior the employer wishes to encourage.   Once this analysis takes place, the design elements of eligibility, measures,  payouts, timing, and  duration of the incentive plan must be determined.  Also important are the legal issues including wage hour law and state wage payments.  If an employee is non-exempt and earns an incentive, the employer may be required to include that incentive in the regular rate for the purposes of calculating overtime. Communication of the plan is also critical so that managers as well as employees understand the plan.