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Incentive compensation is a form of variable compensation in which a salesperson's (or other employee's) earnings are directly tied to the amount of product they sell, the success of their team, or the organization's success.
Make the Plan Adaptable Your company's strategies and goals will change over time, so your incentive plan should be dynamic enough to change with them. However, it's important not to constantly shake up the plan because most employees will need some time to build up success in the incentivized tasks.
An example of a long-term incentive could be a cash plan, equity plan or share plan. A long-term incentive plan can typically run between three years and five years before the full benefit of the incentive is received by the employee.
Decide the length of the incentive plan. Identify the incentives that will be offered to employees. Establish criteria for rewarding employees (e.g. performance metrics, tenure, etc.) Ensure that the criteria you set are achievable and measurable. Make sure the incentives are attractive and motivating to employees.
Incentives like restricted stock-based packages and cash bonuses ? awarded to employees after reaching certain long-term goals or staying on at the company for specified time frames ? are examples of long-term incentive compensation.