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There are various pay plans that recognize merit and performance with different types of incentive plans


There are various pay plans that recognize merit and performance with different types of incentive plans. In a single company, different business units and goals may set up separate incentive plans to reward work more specifically as it contributes to the overall objectives of the unit. Profit sharing and employee stock ownership plans are popular in private as well as publicly traded companies. The world of pay for performance has taken on a much more sophisticated role in our world of work, especially as our work has changed dramatically from the industrial age to the knowledge age.

  • Toggle DrawerQuestions to ConsiderTo deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.
    • Experience tells us that the practical link of pay to work is not always set up in an equitable environment. Favoritism, nepotism, and other human shortcomings can and do interfere with the implementation of the best plans. How to prevent those shortcomings becomes a difficult challenge for HR managers. If you were designing an incentive plan for a publicly traded company, whose voice do you think should provide that ethical audit at the table of decision makers? The chairman? The board of directors? The shareholders? The employees? The executive team or compensation committee? Outside consultants? Internal HR director? A combination of all of these? Who in your mind would be the best person to ensure that the incentive plan does not cross the line and motivate the wrong kind of behavior—the kind that turns a plan from motivating good behavior into motivating wrong-doing based on the potential for a high reward?
    • What is an example of a company you have worked for or read about where someone, motivated by the potential gain from an incentive plan, went beyond the policy and the law, breaking all the rules?



There are a range of incentive plans for individuals and groups or teams. Think like an HR director who is responding to a work situation with a pay solution. Consider different types of pay plans along with their advantages and disadvantages.

Complete the following:

  • Select one individual plan, one team plan, and one long-term incentive plan.
  • Describe a situation in which each of these plans would be most appropriate, and justify why it is appropriate. In your descriptions, include the type of company and type of work as well as the position or positions that would be affected by your plan.

For example, if you selected a team-based plan, you might describe a department in a retail store that has a history of employees not covering for each other during the holiday rush period. You may use actual examples and reference a company as you have witnessed it, or you may describe a generic situation. In your descriptions, include how you think your chosen incentive plan will affect behavior and achieve intended results.

Your assessment should be no longer than two pages. Drafting a table that compares and contrasts the scenarios as a summary is appropriate but also requires a narrative describing the situations. Be sure to use proper APA (6th edition) style and formatting.

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