Incentive pay can come in the form of cash bonuses, company stock or profit sharing, among other options, and it’s typically given in exchange for increased production. If you’ve been offered a job that involves an arrangement such as that, it could be a boon or a bust, depending on the details of the deal.
Here are some things to consider when you’re faced with accepting an incentive-based pay deal.
Are you willing to compete with your co-workers?
Business owners sometimes launch incentive pay programs in order to increase production and, in turn, to increase competition among employees. Some programs only award incentives to the top few producers – meaning you’ll have to compete against your co-workers in a serious way in order to get the extras. If you’re not the extremely competitive type, or getting the pay means more than eight hours on the job, or you simply don’t have the motivation to devote yourself to extra work, that type of structure may not be for you.
Will the base salary be enough to live on?
If you’re not the competitive type, take a good look at how much you’ll be making if you don’t earn any incentives at all. Some companies recruit qualified, trained workers by dangling the carrots of how much they "could" make, but in reality the amount most people "actually" make is a lot less. Find out what the low-end figure is, and then make a budget to determine whether you can survive on that amount alone. If you can, the incentive pay will be gravy on top, and it could be worth taking the job.
What are the long-term consequences of not making quotas?
In some companies, the "incentive program" is actually another word for "quota system." If you don’t produce a certain amount or sell a certain number of units, it means you don’t get the bonus – but it might also mean you’ll be in trouble with your bosses and be subject to other punitive actions. If the incentive pay program comes with a quota requirement, you may be entering into an arrangement that will cause you a lot of stress. If you’re good at what you do, on the other hand, it could mean extra pay and plenty of recognition.
How successful is the business?
If you’re being offered company stocks or profit-sharing as part of your incentive pay, you’d better know how well the business is doing. If the company’s stock is publicly traded, check the markets to find out how it’s been doing. If the company has recently started selling stock, it could be another sign of progress. Also try to find out what you can from newspaper reports, business journal articles, or even word-of-mouth. News of corporate restructuring or other shakeups may be a sign that the company’s "incentive pay" is really a mask for paying workers a low wage while they struggle to keep the business afloat.
After you’ve taken the time to weigh these pros and cons carefully, you should be able to arrive at a decision about whether incentive-based pay is really right for you.