Incentive compensation (aka bonuses) can be an effective tool to manage a company. To be effective, however, incentive awards must be based on the accomplishment of important objectives established at the beginning of the performance period.

Many organizations utilize annual incentive plans, which are intended to generate awards over a one-year period. Other organizations also include long-term plans in the total compensation program. Long-term plans can be equity-based (i.e., for a publicly traded company) or cash-based (i.e., for private or publicly traded companies).

Effective Pay Practices works with organizations to identify important business objectives, agree on eligibility criteria and develop incentive plans, both annual and long-term, which deliver awards to plan participants based on the accomplishment of the objectives.

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