|
Incentive Compensation is defined as the portion of an employee's salary that is related to performance, and not a guaranteed payment. Incentive compensation is additional money, or other rewards of value such as stock options, that are supplementary to base salary.
When "cash" incentive compensation is used, it is usually offered as a percentage of the employee's base salary. For example, an employee with a base salary of $100,000, and 10% incentive compensation, is eligible for an additional $10,000 as part of that program.
This form of compensation goes by the term "incentive" because payment is usually contingent upon performance of the company, the employee's department, the employee, or combinations thereof. This means the employee has an incentive to perform at a high level, and be rewarded for the effort. |
Home 
Definitions 
