With increased performance, tenfold compensation. To motivate their salespeople and other employees, companies have several levers of incentive compensation that have all been proven. Review of the most popular compensation systems.
1. THE TARGET BASED INCENTIVE
The target based incentive is on the rise with companies. The reason? The amount is capped and allows the employer to allocate a maximum bonus budget. It also introduces a concept of requirement to the motivating employee: the employee receives a bonus corresponding to a percentage of his / her objective, and only if a certain percentage of his / her objective is reached, for example as early as 80%.
This bonus of results makes it possible to stimulate sales teams with both quantitative and qualitative indicators. The objectives are indeed financial, related to the increase in turnover or margin, but they can also relate to non-financial measures, like customer satisfaction (on the basis of a score on a satisfaction form for example) or the acquisition of new customers.
In practice, how to implement the target based incentive?
The details related to get target based incentive are determined on the basis of a scheme provided upstream to each employee. It is therefore the role of the manager or the HR team (taking advice from managers), to define and implement the scheme for awarding bonus objectives.
In the case of an upgrade or the introduction of a new scheme, this necessarily involves an amendment to the employment contract of employees for which the variable remuneration is affected.
For the employee, the target incentive compensation therefore provides for an amount of bonuses the payment of which is subject to the achievement of objectives set over a given period (one month, one quarter, one year).
The bonus level reached
Many compensation plans operate by tier system or thresholds, with the receipt of bonuses contingent on the achievement of successive steps. The tiered pay system can be counter-productive for your teams in that they will tend to stay in their comfort zone and if they feel they are not going to reach the expected deadline at the next level.
The case of Team bonus
The target based incentive can also be calculated for a team. This helps foster cohesion and collaborative behaviour between your employees.
Note that the team bonus is also referred to as the one that can be granted to collaborators working in teams, generally on posted schedules (2-8, 3-8, staggered hours, etc.). It is calculated per day worked that is to say that it is not paid during the employee's absences such as paid holidays, medical leave, compensatory rest, etc. It is often revalued each year according to the evolution of the guaranteed minimum
2. COMMISSIONING: THE PREFERRED BONUS OF ANGLO-SAXON
With the commission, the salesman benefits from the principle of "the more I sell, the more I earn". This principle often applies individually from the first euro sold and the amount is rarely capped.
The commissioning can be very motivating for the salesmen, from the moment when they are responsible for the act of sale in its totality, without intervening other teams. However, this calculation process only takes into account quantitative rules, unlike the target bonus. This system may not be suitable for all business strategies. Commissioning does not bring any performance constraints. It is therefore recommended as part of a product or sector whose potential is difficult to evaluate. However, commissioning can be based on the team's performance to promote collective success and be unlocked only after a certain sales threshold to ensure a level of activity sufficient to trigger the bonus.
3. THE EXCEPTIONAL BONUS
Flexibility is the key word of the exceptional bonus. It does not commit you to the duration and is ideal to control your salary costs. You are free to give it to certain employees and to choose the amount ... provided however to base your choices on objective criteria so as not to have a backlash.
To maintain its exceptional character, the exceptional bonus must be linked to a particular event of the company. For example, it can be justified for signing with a very important customer. It must not be paid in the same manner more than two years in a row. As you can see, the exceptional bonus must remain exceptional!
4. PROFIT SHARING SCHEME
These bonuses are generally granted to all staff and only pay for membership in the company. No consideration of the function of the collaborator is taken into account. Those bonuses are more common among large groups in the form of generalized bonuses. They do not establish judgment on the performance of each
5. THE SENIORITY BONUS
Although they are frequently found in certain sectors because of collective agreements that make them mandatory (hairstyling, certain public professions), these types of bonus are on the decline and represent only a small part of the volume of bonus in France. The seniority bonus is common for crafts, crafts or education where the performance of each is difficult to analyze.
6. STOCK-OPTIONS - THE PREFERRED BONUS OF STARTUPS?
Stock options (purchase or subscription options) have been widely used by start-ups and large companies. Since 2010, they are much less attractive because of changes in taxation. This mode of remuneration tends to disappear as the gain is uncertain and its triggering far.
This system is used by offering to employees who want to subscribe or buy, during a specified period, shares of their company at a price fixed in advance and not modifiable during the duration of the option.
There is therefore less and less stock option, much to the chagrin of startups who used it to justify low wages and incentivize their teams on the value of the company. For history, many millionaire developers have had their fortune in this mode of variable compensation after their startup is listed on the stock market.
7. "LIFE PACKAGE": AN EXCEPTIONAL BONUS!
A wedding? A birth? Moving? The company feels concerned by the personal situation of its employees. They can give you a bonus to show her willingness to accompany you during your important family events.
