What is an example of a group incentive plan?

Career Development
A Guide to Employee Incentive Programs (With Examples)

By Indeed Editorial Team

Published 13 December 2021

Employee incentives are benefits used in a business environment to attract desirable candidates, promote staff productivity and build loyalty to the company. Incentives can be financial or other non-monetary motivational rewards. Knowing what different incentives are on offer can help you understand which ones are most valuable to you. In this article, we explore what staff member incentives are, outline the differences between individual and group incentives and look at 19 different types.

What is an employee incentive?

An employee incentive is a reward that inspires or motivates employees individually or collectively to accomplish certain tasks or reach specific goals. An incentive program may offer rewards that are monetary or non-monetary and may apply to individuals, teams, different company branches or an entire company. Employers typically offer incentives at their own discretion.

Related: Your Guide to the Types of Employee Benefits

Individual vs. group incentives

Employers can use incentives to encourage employees to give their best work. Sometimes incentives are most effective when awarded to individuals, as this can encourage healthy competition. Other occasions call for a group incentive. An employer may offer employees a combination of the two, as not all incentives may work for everybody. Here is the key difference between the two:

Individual incentives: Individual incentives reward the contributions of each employee and encourage them to work at their highest level of output. Getting credit for their efforts encourages employees to keep producing work of a high standard.
Group incentives: Group incentives apply when teams of employees work together on projects. Awarding group incentives helps by encouraging team members to work together toward a common goal and creating an environment suited to mentoring junior employees.

Related: What Makes a Good Team? (Qualities and Tips to Improve Teamwork)

Benefits of incentives in business

Business incentives can lead to increased productivity and better work quality. Incentives also increase morale, as employees may feel valued when recognised for their achievements. Competitive incentives often encourage employees to exceed expectations a little quicker than usual. Group incentives help team members prioritise building interpersonal relationships and improve job satisfaction.

19 employee incentive program examples

Here's a list of examples of incentives that employees might receive from their employers:

1. Salary incentives

A competitive market-related salary is an incentive that may attract highly qualified candidates to a company. For existing employees, a good salary can be a reason to remain loyal and not be open to alternate employment. Salary incentives might include a raise after a specific amount of time at the company, tips or vouchers.

2. Subsidies for expenses or education

A subsidy provides an amount of money to help an employee fulfil their function. Subsidies can cover work expenses, such as internet costs for remote work or the cost of specific equipment. A portion of an employee's continued education can fall under a subsidy payment.

3. Tax incentives

Hiring a candidate as a full-time employee as opposed to a casual or contract employee may make them eligible to pay less tax. A casual or contractor with non-employee status could pay more tax than a permanent employee. Employers can use this as an employee incentive to attract talented candidates to join the team and become full-time employees.

4. Efficient reimbursement system

Setting up an efficient reimbursement system for repaying work-related expenses can also be an incentive. Some employees, such as sales representatives, travel for business often and claim back their expenses in return. A quick repayment system may increase employee confidence and foster a willingness to keep operating using this system. For prospective employees who make use of reimbursement, a well-run system may sway them to accept the position.

Company profit-sharing works on the principle of aiming to meet a company's earnings target. Once the company reaches that goal, employees may receive a share of all income above that figure. Employees could work harder to increase the company's profits, knowing it can directly benefit them.

6. Performance bonuses

A bonus related to an employee's performance over a specified time period can be a common incentive at work. Paid out quarterly or annually, bonuses are incentives that apply across most industries and can be group or individual. Bonus amounts may depend on performance related statistics like sales. Alternatively, employees can achieve a fixed amount if they fulfil an agreed condition.

7. Commission incentives

Commission is the amount of money that an employee gets per sale. It's a sales incentive and applies to both products and services. Commission as an incentive is common across many industries, such as real estate, personal beauty services and most retail outlets.

Related: Sales Commission: Types and Structures (With FAQs)

8. In-house competition incentives

This is one of the commonly used employee incentive programs, as friendly in-house competitions can encourage them to reach targets. The contest can be between employees as individuals, departments or teams. Rewards may be financial or other prizes, such as weekends away or luxury hampers. Competition incentives can help employees feel they are part of a business that recognises and rewards extra effort.

9. Opportunity incentives

Opportunity incentives reward diligent work with the chance to take on harder or more prestigious assignments. This can come with access to further education and training. Opportunity incentives may help employees advance their career internally, meaning companies can maintain knowledgeable team members.

10. Praise incentives

Praise as an incentive is a powerful means of recognising and acknowledging employee performance. Receiving praise, especially one-on-one, can boost morale. Praise is an effective non-monetary incentive that can create a positive atmosphere in a business.

11. Fringe benefits as an incentive

Fringe benefits are indirect financial incentives in which an employer covers significant financial expenses for an employee. Commonly covered expenses are housing, childcare and insurance. Some companies, such as estate agents or delivery services may also provide a company vehicle as an incentive.

12. Retirement benefits as an incentive

Some employers match their employees' retirement contributions to their retirement fund. Diligent employees may receive an increased contribution percentage. Employees may feel motivated to work hard when they know the company is investing money into their future.

13. Co-partnership incentive

Offering an employee a co-partnership is an incentive reward that gives them shares in the company. This can be a mutually beneficial incentive, as it motivates the employee to work for the company's success. The employees' opportunity for financial rewards can increase as the company thrives.

14. Promotion opportunities as an incentive

Promotion opportunities are excellent incentives for existing employees. Companies may release promotional opportunities to internal members before advertising to external candidates. Providing progressive opportunities often encourages employees to develop their skills and take on additional responsibility as they become more knowledgeable in their role. Future candidates may also see this as an appealing incentive to apply to the company.

15. Donation matching

A company that donates to charity creates an ethos of caring that may filter down to the employees. Some companies implement a donation matching plan where they donate an equal amount as the employee to a chosen charity or cause. This can show a company's support of the local community and care for those employed.

16. Time off in lieu of overtime (TOIL)

Some employers offer time off in lieu or overtime. This option gives the employee compensatory downtime for overtime worked instead of overtime pay. Having time off can lead to a rested employee. Refreshed employees may work more productively.

17. Public recognition

Public recognition of a team effort or individual accomplishment might be a motivating incentive. A platform for public recognition in a business can include an employee of the month plaque or a company celebration years-of-service pins. Annual awards dinners that acknowledge good work ethic, exceptional customer service or sales achievements are sometimes an incentive.

Employees may feel a sense of purpose when they see the results of their hard work. Sharing positive results following a large project can also strengthen working relationships, as employees feel collectively proud. This information can also help employees set more ambitious goals.

Signs of a beneficial incentive program

Here are some signs of a worthwhile incentive program:

Aligns with the company and employee goals: An incentive program may match the company's ethics and goals, while also responding to what employees want for themselves and their careers.
Offers flexible options for group and individual incentive plans: A combination of individual and group incentives offers employees flexible benefits. It also allows them to receive benefits following their preferred working style.
Opportunity for employee feedback: When employees have a space to offer their ideas and critiques of current incentive plans, their employers can customise those plans for greater appeal and productivity.
Conditions are clear: Clearly defined standards are available for employees to read and study. Clear benefits may also encourage a higher application rate.
Prompt follow-through on all rewards: Effective incentives are attainable and quickly fulfilled when employees meet the goals.