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March 25, 2010
Putting Your Incentive Pay Plan in Writing

In a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’, Dan Kleinman describes the importance of incentive pay plan management within the organization. One step towards managing incentive pay programs in your organization is to put the incentive pay plan in writing and this step is explained below:

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  • Writing out an incentive pay plan sounds simple, but it is surprising how many employers announce new incentives in the break room or via group meetings with supervisors without sharing anything in writing
  • Nothing leads to more confusion among employees and supervisors than a bonus plan or incentive program that’s not on paper
  • Once the plan is in writing, you can review it for any loopholes you’ve missed (e.g. forgetting to mention that the incentives are subject to change at your discretion and that they’re not considered base pay)
  • Also, you can distribute it to a few key supervisors and frontline workers for feedback
  • Make sure the written plan spells out, in great detail, the ‘measurable data’ you’re looking for as the finish line employees must cross to earn their incentives
  • Also, the plan should describe who’s eligible for which incentives and you should make sure those workers have a written copy of the final draft of your plans

Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. He can be reached at info@dankleinmanconsulting.com.

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