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Incentive Compensation is defined at 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 additional 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 itself, 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.
Other forms of this term include - incentive pay, incentive comp., incentives |
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