• Incentives can help employee performance.asian business people image by huaxiadragon from Fotolia.com
  
  When you decide to motivate your employees by offering compensation for exceptional performance, you are using what are called incentive plans. Incentive compensation differs from a company-offered bonus, such as a profit sharing plan. Incentives must be earned, but profit sharing is paid to everyone in your organization regardless of performance. There are many advantages to having an active incentive program.
  
  

Individual Performance Enhancement

• A profit sharing plan is something that may motivate some people to work harder, but, if the company shares the profit with every employee, then there will be some people who choose not to put forth extra effort. An individual incentive program, on the other hand, motivates staff to exert more effort because extra compensation is paid only to those who perform above the established metrics. Your company will see a rise in personnel productivity when you use an individual incentive program.
  
  

Employee Development

• One aspect of an incentive program that may be overlooked is the opportunity to develop employees who underperform. While an incentive program should not be used as the only measuring tool for an employee's production, it may be taken into consideration when an employee regularly misses out on easily attained incentive payments. It may be a case of the employee needing better training, or not being qualified to perform the job that has been assigned. Do not assume that the employee is not motivated. There may be other factors involved that need to be reviewed between the worker and the company.
  
  

Company Profitability

• Paying all employees a profit sharing bonus based on the performance of the company may prove to be more expensive than offering incentive bonuses to employees who continually perform beyond expectations. When someone earns an incentive, it means that enough revenue was generated by above average performance to cover the cost of the additional pay. Employees who receive a profit sharing payment may not have produced enough additional revenue to cover their portion of the pay-out. An incentive payment is earned from profit generated, and that can add money to the company's bottom line.