Complete Guide to Incentive Compensation Management

by | May 25, 2022

An incentive compensation plan represents a wide range of compensation methods. It encompasses commissions, bonuses, spiffs, and other incentives not limited to monetary gifts. When considered altogether, it’s an effective way to motivate a workforce.

Depending on the organization, incentive compensation can be a complex job. Anyone managing incentive compensation juggles a number of moving parts. It generally includes primarily cash-based incentives but it may incorporate other incentives, like travel or company cars. It gets tricky to keep all those moving parts going in the right direction. Luckily, there’s automation that can help ease the workload.

An image of a group of skydivers holding onto each other in a geometric formation representing the connecting pieces of incentive compensation managment.

What is Incentive Compensation Management?

Incentive compensation, often referred to as performance-based pay or variable pay, is a form of compensation that ties an employee’s earnings to the achievement of specific goals, targets, or performance metrics. Unlike fixed salaries, which remain constant regardless of individual or organizational performance, incentive compensation provides employees with the opportunity to unlock additional earnings by meeting outlined goals. All the various parts of incentive compensation come together to motivate a workforce but it can be difficult to manage.

Incentive compensation management is all that goes into managing incentive payments for employees. This includes tracking and measuring goals, accurately calculating incentive payments based on their performance, producing reports for employees, managers, and leadership teams, and more. Automation takes a lot of the hard work out of managing incentive compensation and allows administrators to focus on other priorities. Core Commissions aims to provide that freedom and flexibility to a business by automating incentives and commissions.

Types of Incentive Compensation

Commissions: Whether it’s straight commissions or a commission component of overall compensation, it counts as incentives. This compensation method may be rewarded upon a sale, an initial payment, a subscription, or another milestone in the process of a sale. It varies from industry to industry and company to company.

No matter how a commission is distributed, Core Commissions can automate it. Our rules engine handles any level of complexity easily. Then, with a click of a button, it processes calculations immediately.

Year-end Bonuses: Every company determines year-end bonuses differently. The one-time payment falls within a specified percentage of salary and depends on a number of criteria. Anything from revenue growth to performance and even customer churn impact that cash bonus. It may even change every year, requiring an administrator to not only remember last year’s criteria but then factor in the new calculations.

At Core Commissions, we handle all of it. Tell our rules engine what you need it to calculate, give it the data it needs, and it’ll get you the results. If calculations shift each year, that’s an easy change to make with our drag-and-drop tools.

Sign-On Bonuses: Attracting great talent can be tough — especially now! It’s a good reason to consider offering sign-on bonuses to brand new hires. Those stellar candidates that you want on your team will be more motivated to join you if they can get paid. That bonus may be based on salary or projected performance. Whatever the case, it’s not a simple and easy calculation. It gets even more complicated when hiring ramps up.

If you give Core Commissions the information it needs about that sign-on bonus, it can calculate it too. The employee’s information, start date, compensation, and other information would need to be added to the system but that’s easy enough with our data ingestion process. So set it and forget it and you’ll see recruitment get a boost.

Performance Bonuses or Spiffs: When employees get a bonus or additional cash for hitting quotas and goals, that falls into the category of performance bonuses or spiffs. With a large salesforce and a range of rates and quotas, that gets tough to track. Each employee may be hitting those milestones at different times and trigger different spiffs.

Thanks to Core Commissions’ technology, those individual factors can be implemented into the application. That way, the application has to remember when someone gets cash — not the administrator.

Other Cash Incentives: Businesses apply all styles of cash incentives to keep their employees moving forward. Core Commissions is set up to support anything that requires a calculation. Tell us what you need the application to do and we can automate it for you.

Automate Incentive Compensation Management with Core Commissions

Incentive compensation management has a lot of moving pieces involved and can be very complex and difficult to manage in Excel spreadsheets. An automated incentive compensation management platform will help cut your time by as much as 85%!

Ask us about all the incentives Core can handle. Set up a free demo and we’ll give you all the answers you need. We look forward to learning more about your company’s unique incentive compensation plan.

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