Incentive Pay

What does Incentive Pay mean?

Incentive pay is any type of monetary gift, commission, bonus, or profit-sharing given to an employee for their work performance. The goal of incentive pay is to entice the worker to work harder and produce greater results for the company.

Disadvantages of Incentive Pay

Although businesses continue to use incentive pay to motivate workers, research indicates that over time if workers continue to perform the same work and receive incentive pay the incentive pay becomes expected and is viewed less as an award. Despite the disadvantages, however, others argue that if work does not have intrinsic value or meaning for the worker incentive pay can be an extrinsic means to motivate the worker.

Critics of incentive pay continue to suggest that rather than provide incentive pay to workers it may be better if an employer could help employees feel more connected to their environment through increased competence or by helping to create a feeling that the employee's ideals and values are aligned or match those of the business. By creating incentive packages, which combine extrinsic as well as intrinsic rewards, companies may find that employees are more motivated to work hard and create value for the company.

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Term of the Day

Davis Bacon and Related Acts

Signed into law in 1931 by President Herbert Hoover, the Davis Bacon Act established a federal law that requires contractors and subcontractors, who are working on federally funded or assisted contracts for “the construction, alteration, or repair of public buildings or public works in excess of $2,000,” to be paid the local wage.

Category: Employment Law