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This report includes a summary of key changes, including the salary level test and salary basis test.

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March 27, 2010
Common Mistakes that Organizations Make Regarding Incentives

Dan Kleinman discusses common incentive-related mistakes in a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’. He mentions four common mistakes that organizations make regarding incentives. These four mistakes are:

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  • Mistake 1: The incentive rewards are too small to be valued
  • Mistake 2: The incentive pay process isn’t fairly handled
  • Mistake 3: Employees don’t honestly believe they can earn the incentives
  • Mistake 4: In today’s economy, incentive pay budgets may vary year to year. This means the same job performance goals could bring different rewards

Employers must try not to pull back the incentives throttle beyond the point that their bonuses truly attract the attention of their workers. An incentive plan needs to be fair if it is to have longevity. If workers do not consider an incentive plan to be fair, it will usually have a short life-span. Also, unrealistic incentive plans also do not survive and employers who tie incentive levels to whether the organization is having a ‘good year’ or a ‘bad year’ can have their own set of problems.

Dan Kleinman is the principal of Dan Kleinman Consulting (www.dankleinmanconsulting.com), a California-based compensation and human resource consulting firm. He has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services. He can be reached at info@dankleinmanconsulting.com.

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