Incentive Compensation for Contractors - Audience Question: Higher Base Compensation?

There is absolutely no perfect ratio between base vs. incentive compensation.

Courtney Stearns Profile Picture
Share
Contributors Sue Weiler-Doke David Brown

Here are the variables and some rules of thumb:

  • The more specific the role, such as crafts person, the more of their compensation should be in base pay. The more ambiguous their role up to the CEO, the more of their compensation should be in the form of various incentive packages.
  • The less experience someone has, the more of their compensation should come from base pay. This will help with recruiting, and as they grow in their role, they can be rewarded with more incentive compensation.
  • The ratio people prefer changes throughout their lives. Someone with a new family and a single income will likely lean toward heavier base compensation due to their relatively high monthly expenses compared to their income. There are other life events that make people change their preferences such as divorce, family medical issues, kids in college, or taking care of aging parents.

Get to know your people well. Watch their actions. Make the best decision you can on this ratio and know that you will be changing it over time.


In this video series Courtney Stearns, Sue Weiler-Doke, and David Brown discuss the most common questions we get from contractors about incentive programs, including a bunch of great questions from the audience.

This is Part 15 of a 20-Part Series


Topics Covered in the Series Include:

  • Who Benefits?
  • Calculations
  • Types of Programs
  • Behaviors
  • Union vs Open

All relationships start with a simple conversation. Let’s schedule some time to talk about your specific challenges and opportunities.


Incentive Programs for Contractors
Every successful and profitably growing contractor we work with has a comprehensive and integrated set of incentive programs in place at all levels of the organization. These programs reinforce the daily actions and behaviors that make them successful. ...

Incentive Programs for Contractors
Every successful and profitably growing contractor we work with has a comprehensive and integrated set of incentive programs in place at all levels of the organization. These programs reinforce the daily actions and behaviors that make them successful. ...

Diffusion of Innovations Curve
The contractors that dominate tomorrow’s market will be those that have built strong capabilities for identifying opportunities or problems then rapidly making lasting changes throughout the organization.
Changes - Impacts Beyond the Direct Costs
Contractors don't typically see the full negative impact of changes and, therefore, don’t put the right level of resources into their management.
Attracting and Retaining Talent - 5 Critical Questions
To attract and retain the best talent everyone on your team must be able to clearly answer these 5 critical questions.