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?
- Types of Programs
- Union vs Open
All relationships start with a simple conversation. Let’s schedule some time to talk about your specific challenges and opportunities.