Creating, structuring, and implementing a proper employee incentive plan can help a company attract and retain talented individuals. There are many varieties of employee incentive plans, and many ways to structure them. Incentives generally come in the form of cash, equity or a combination of both. Examples of employee incentive plans include stock option plans, stock award plans, stock appreciate rights and performance bonus plans.
What Should An Employee Incentive Plan Contain?
A successful employee incentive plan should include, among other things:
- Clearly defined goals that enable employees to track their progress.
- Milestones that employees perceive to be reasonable and achievable.
- A reward that employees perceive to be valuable.
It is important to determine whether ownership, cash or a combination of both would be considered valuable by the employees. The sense of ownership created by equity incentives is often very motivating, however, cash is often more motivating.
Finally, it is important to occasionally review and modify a company's employee incentive plan for effectiveness, cost and satisfaction. The best solution a few years ago may not be the best solution now.
Steps to Create An Incentive Program
Creating an employee incentive plan is not easy, but many professionals specialize in this area, including experienced employee incentive plan attorneys. An employee incentive plan attorney can assist a company by:
- Carefully defining the goals and objectives of an employee incentive plan;
- Structuring an employee incentive plan so it is motivating to employees; and
- Drafting and implementing an employee incentive plan.