Effective Performance Incentives Ideas for Employees

May 31, 2024
Sheetal S Kumar
Sheetal S Kumar
Sheetal S Kumar
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You hired a top-performing candidate with a lot of expectations.

The initial phase was good as they met their expectations and performed well. 

Gradually there seemed to be a decline and eventually, the new hire left the company. 

When asked what went wrong in the exit interview, they said a lack of feedback and motivation. 

Data shows that 96% of employees consider getting regular feedback to be a good thing.

This is because feedback helps them understand their areas of strength and improvement. 

It keeps them in a constant momentum for growth. 

A space lacking regular feedback leaves the employee confused, stagnant and eventually resigns. 

So here is something you can do to overcome such a situation. Create a regular performance feedback system and reward people for their efforts. 

In short,  create a performance incentive plan. 

In this article, we will explore performance incentives meaning, how they help in employee motivation, and the steps to starting a performance incentive program. 

We will show you a few performance incentives examples, some best practices as well as challenges with the incentive program. 

So let's scroll down to know how a good performance incentive makes your top performer stay. 

What are performance incentives?

Performance incentives are rewards and perks given to employees who exceed their performance expectations. 

Employees receive rewards in the form of monetary or non-monetary rewards. Monetary rewards are bonuses, commissions, and profit-sharing. 

While non-monetary rewards are public recognition, professional development opportunities, flexible work hours, etc. 

Providing these perks and incentives will motivate employees to enhance their performance, improve their employee engagement and morale, and create a sense of achievement and satisfaction. 

These positive efforts in recognizing your employees' efforts and contributions will eventually help the company drive growth and success.  

Performance Incentive Ideas

Monetary Incentive 

Non-monetary Incentive


Public Recognition


Professional Development Opportunities


Paid Time Off

Stock Options

Flexible Work Schedule

Salary Increment 

Wellness Programs

How incentive programs motivate employees

Performance incentives are an integral part of employee management. 

In fact, a properly structured incentive program can enhance employee performance by 44%. 

These numbers show that when an employee feels appreciated and recognized in their work, they achieve a lot more than just completing their tasks. 

Incentives have the power to make waves in various areas of employee management. It enhances:  

This is just the tip of the iceberg of what recognizing and incentivizing your employees can do to your overall organization. 

And to gain all the benefits of a performance incentive plan, you need to put time and effort into building an effective performance incentive program. 

Steps to starting a performance incentive program

Thought and effort go into building a performance incentive program. With the right mix of ingredients, it will reap the benefits you seek. 

But it takes a step-by-step process to achieve these desired outputs. Let's go through each step in detail to ensure that no stone is left unturned.

Steps to starting a performance incentive program

Identify Objectives 

First, understand what you aim to achieve out of the incentive program. Is it employee motivation, engagement, or performance enhancement? 

Understand Employee 

Secondly, put effort into understanding your employees. Their needs, preferences, and requirements. This helps in choosing between monetary and non-monetary rewards. 

Set Achievable Targets 

Performance bonuses are earned upon achieving your targets and goals. These targets must be specific, measurable, achievable, relevant, and fulfilled within a particular time period. 

Create a Budget

At the beginning of each financial year, companies must allocate a specific budget for the incentive program. This helps in designing effective rewards without exceeding limits. 

Communicate the Plan

A crucial step in performance incentive planning is communicating to the beneficiaries about the specifics of the program. The key performance metrics, eligibility criteria, and other relevant information. 

Implement the Program 

For effective implementation of incentive programs, companies must provide tools, resources, and training to employees that will help them achieve their targets and become eligible for the reward. 

Monitor and Upgrade

Remember building performance incentives for employees is not a one-time process. The market, competition, and your employees are all dynamic. You need to keep an eye on these changes and upgrade them to ensure their relevance and effectiveness. 

This means that having a performance incentive program as a part of your operation is an ongoing process. 

It is not a one-time effort and a one-size-fits-all approach. You need to mold your incentives based on the changing trends and changing employees.

Ways to motivate employees through performance incentives

The right tool delivers the right result. 

Companies reported a 79% success rate in goal achievement when their employees were given the correct reward.  

This shows that the effectiveness of incentives goes much beyond just building a performance incentive plan. 

It also depends on choosing the right one. 

So here is a list of performance incentives that can help you achieve your desired goals: 

  • Cash Bonuses
  • Profit Sharing
  • Stock Options
  • Sales Commissions
  • Merit Pay Increment
  • Paid Time Off
  • Public Recognition
  • Professional Development Opportunities
  • Flexible Work Arrangement
  • Team Bonuses

Each of these incentives varies in its purpose, objective, use, and other factors. 

So let's look at how these incentives are unique in their own ways: 

Cash Bonuses

Cash bonuses are awarded when employees achieve a specific performance target or exceed their expectations. 

Profit Sharing 

Companies offer incentives in the form of a portion of the company’s profit. This ensures that employees work to enhance the profit share of the company and themselves.  

Stock Options

Long-term employees are granted the opportunity to buy company stock at a fixed price. This ensures they align their personal goals with the company’s success. 

Sales Commissions

Sales rep performance is measured based on their sales closing and target achievement. Depending on these metrics, they receive sales commissions as incentives. 

Merit Pay Increment

Employees are evaluated annually based on their performance and contribution. Depending on their improvement they are given a salary increment.    

Paid Time Off

Paid time off is given when employees need a break from work. It can be for vacation, personal reasons, illness or just wanting some time off work. 

Public Recognition

Employees are appreciated and recognized for their achievements through awards and prizes. 

Professional Development Opportunities

Employees can be rewarded through professional development opportunities. Giving training, workshops, and other learning opportunities helps them upskill and improve their career. 

Flexible Work Arrangements

Today's workforce is looking for professional growth without compromising on personal responsibilities. Remote options and flexible working hours help strike this work-life balance. 

Team Bonuses

Incentives are given when teams achieve their goals or exceed their performance expectations. It encourages employees for future collaboration and teamwork. 

Organizations can choose between these varieties depending on their needs, requirements, and preferences. 

What are the best performance incentives practices? 

As a sales leader, you are putting constant effort into improving your performance incentive plan. 

But a little tip and trick can take you a long way in ensuring your desired results. 

What are the best performance incentives practices? 

Your Goals Need to be SMART

SMART refers to specific, measurable, achievable, relevant, and time-bound. Setting SMART goals gives clarity to employees on what is expected from them. 

Your Feedback Needs to be Constructive 

Provide regular, constructive, and timely feedback to your employees. This helps them understand their areas of improvement, take up these suggestions, and work towards improvement. 

Your Incentive Needs to be Personalized 

Incentives don't follow the one-stitch-fits-all formula. It needs personalization depending on the needs, requirements, and preferences of the employees. Understand what your employee seeks and cater to it. 

Your Process Needs to be Fair

A tool is effective only when people think it's fair and transparent. This means employees need to have clarity on the evaluation criteria, incentive calculation, and other metrics. Providing fairness fosters trust in the process. 

Your Culture Needs to be Celebratory

Do not just give a reward and end it. A good incentive program recognizes achievements publicly. It gives employees the space to celebrate their success, recognize their accomplishments, and motivate them for future endeavors. 

Remembering these small but significant points will help transform your incentive plan. 

Performance incentive plans are not just a contest for getting more money. When implemented with the right ingredients it can enhance your overall organizational culture. 

Performance Incentive Problems to be Addressed 

No tool is devoid of problems. At some point in operations, challenges and issues are bound to arise. 

Up to this point, we have discussed only the benefits of incentives. Now, it's time to address the elephant in the room. 

Surely as powerful a tool as it is, performance incentives have their own set of problems and challenges. 

Addressing these problems will help ensure that the effectiveness of incentives doesn't take a back seat. 

  • Incentives can make your employees short-sighted. Their focus will be limited to achieving the set goals for getting the incentives. 
  • Performance evaluation can turn subjective and biased. This can lead to the loss of credibility and effectiveness of the incentive program. 
  • Setting unachievable goals can demotivate employees. Unrealistic expectations can discourage them from using their potential to achieve their targets. 
  • Performance incentives might extinguish intrinsic motivation. At this point,  employee actions are driven only by the desire to achieve rewards.   
  • Incentives can make employees risk-aversive. They will focus only on achieving the set goals and refrain from coming up with innovative ways of driving growth and success. 
  • Tracking performance and providing incentives for a large group becomes a challenge. This can confuse employees and affect the incentive purpose.  

These challenges are not solutions. Taking a proactive approach in building and implementing your incentive program will help in addressing and overcoming these challenges. 

Final Thoughts

Performance incentive plan creates a win-win situation for the employer and the employee. 

For the employer, it creates a system for objectively evaluating their employee performance. 

On the other hand, it gives clarity to the employee on what is expected of them. 

But there is a gap in this whole perfect and synchronized system! 

With more than 100 employees, can a company ensure objectivity, clarity, and transparency in the evaluation? 

One crack in the plan will eventually lead to the total downfall of the system. 

A simple step can prevent this mishap and hold your incentive plan strong. 

Kennect’s incentive automation solution.  

Employee Perks: We offer unparalleled transparency and strategic insights to your sales reps. Our platform will help boost performance, motivate efforts, and streamline strategies.

Employer Perks: Our platform centralizes all your sales performance-related data. Sales leaders can use it for performance evaluation, employee appraisals, and business strategy discussions.

In addition, we also support finance and compliance.  Our ready-to-use reports in standard audit formats mitigate the risks of non-compliance and potential legal issues. 

Now's the time to supercharge your incentives with our cutting-edge solution. Book A Demo with us to automate your entire sales incentives process. 


Sheetal S Kumar

Sheetal is a content strategist and writer at Kennect. She has extensive writing experience in content marketing and research, focused on small business enterprises and B2B Saas. She is passionate about creating engaging and insightful blogs while exploring the power of content and social media.


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Excellent blog about using sales coaching to improve the typical sales onboarding process! For more information please read the blog:https://salesblink.io/blog/sales-coaching


Loved the tips on effective sales coaching For more information please read the blog:https://salesblink.io/blog/sales-coaching

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