Tying pay to performance can motivate employees
Motivating your employees isn’t always easy.
It’s natural for people to settle into routines that don’t always encourage peak performance.
After a while, some people may just be present to pick up their paycheque.
So what can you do as an owner or manager to reinvigorate your employees?
Giving them something to aim for, and rewarding them when they achieve that, can be very effective.
This is where incentive pay could come in. In this article, we’ll look at what incentive pay is and how your business can use it to improve performance amongst your employees.
What is incentive pay?
Incentive pay is additional pay that employees are given which is tied to their performance in their role. In essence, it rewards them for doing their job well, rather than simply paying them for the hours they’ve worked.
It is typically treated a little differently to bonuses like annual or Christmas bonuses, which often reflect the wider success of the company or a giving time of year. Instead, incentive pay is usually tied to an individual’s performance against defined goals.
Employees can either be rewarded for meeting a single target, or receive a smaller payment for each time they achieve a certain goal.
The key to incentive pay is that by being tied to the actual performance of the employee within their role, it encourages them to do more, benefiting themselves and your business at the same time.
What do you want to encourage?
This is an important question to consider before setting up any kind of incentive pay. It can be used as a motivational tool to drive sales targets, specific behaviours, customer satisfaction, or many other aims and metrics.
In order to know what you want to reward, you need to understand what’s good for your business. Of course, sometimes the answer to this is simple. Driving more sales is often just going to be good for your bottom line regardless.
But things can sometimes be more complex than that. Maybe you have multiple different products and services and aren’t sure which ones are worth encouraging further.
What gives the biggest profit margin? Is there a limit on your capacity to deliver them? Is there any way that focusing on a given goal too much could have negative consequences?
What rewards can you offer?
Cash is often the simplest way to handle incentive pay, and as such, it is the most common. If you’re considering introducing incentive pay in your business for the first time, this can be a good place to start.
Providing a fixed payment for each completion of a specified task is typical. You may want to consider setting an upper limit or maximum value for schemes like this, just to ensure you don’t cause yourself too much trouble!
There are plenty of other incentives you might consider offering instead of fixed monetary payments. Extra holiday, entries into a prize day, vouchers or other gifts can also do the trick.
More flexibility when it comes to their working hours can also make for a great reward. Scheduling solutions like Findmyshift make this easy to implement.
Just make sure you’re clear on what the rewards entail ahead of time. You don’t want anyone feeling like they’ve been tricked.
How to start an incentive pay scheme
Once you’ve answered the questions above, you are well-positioned to introduce an incentive scheme into your business. But first things first, you should talk to your employees.
Understanding whether the goals you’re looking to set are achievable is an important step. So is making sure that the rewards on offer actually serve to motivate people.
Set up a time to discuss any possible incentive scheme with your employees. Explain what you’re looking to achieve and how you hope to do it. You’re likely to receive valuable feedback on multiple aspects of your proposal.
At the end of the day, any scheme you put in place needs to be the right fit for your business. That means that it delivers positive outcomes, achieves return on investment, and rewards your employees. If you can tick all those boxes, you’re on your way to a winner.