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April 17, 2010
Compensation 101: Bonuses Versus Incentives

Bonuses and incentives are terms that are often used interchangeably, but they're actually quite different. In a BLR webinar titled "Compensation 101: Essential Secrets and Strategies for HR Professionals," Paul R. Dorf outlined the key differences between them:

Bonuses

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  • Determined after the performance period
  • Linkage is not clear
  • Performance plan is vague
  • More difficult to communicate goals
  • Awards tend to be smaller
  • Likely of becoming an entitlement

Incentives

  • Determined at beginning of period
  • Linkage is very clear
  • Detailed performance plan is required
  • Can easily be communicated
  • Awards tend to be more significant

Paul Dorf is the Managing Director of Compensation Resources, Inc. (CRI). CRI (www.compensationresources.com) specializes in providing comprehensive Compensation and Human Resource consulting services. Dorf is responsible for directing consulting services in all areas of executive compensation, short and long term incentives, sales compensation, performance management programs, and salary admin programs.

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