Short-Term Incentives No Longer Just for Executives
May 08, 2018
Short-term, cash incentives continue to dominate the incentive-pay landscape at both private companies and nonprofit/government organizations according to research released today by WorldatWork in partnership with Vivient Consulting.
“Spending on short-term incentives (STIs) increased modestly at private companies from 2015 to 2017, which reflects the tight labor market and competition for talent,” said Bonnie Schindler, partner and co-founder of Vivient Consulting.
On the nonprofit side: “U.S. nonprofit organizations continue to make significant use of short-term cash incentives to motivate and reward employees. Long-term incentive (LTI) use is still a little-used compensation element, but prevalence increased modestly in 2017 and may signal an emerging trend,” Schindler said.
Additional Key Findings
Spending on STIs increased to 6% of operating profit at median, from 5% in prior years.
The prevalence of exempt, salaried employees and nonexempt (salaried or hourly) employees included in annual incentive plans increased in 2017. The biggest jump occurred for nonexempt employees. Approximately two-thirds of nonexempt employees are eligible for annual incentives, up from half in 2015.
The majority of respondents consider their annual incentive plans to be only moderately effective, with plan communication, the level of discretion, goal setting and the risk-reward trade-off noted as areas for improvement.
Nonprofit and government organizations favor simplicity by offering a limited number of STI plans. Of the respondents, more than 75% reported having three or fewer STI plans in place.
By far, the most common type of STI plan at nonprofit and government organizations continues to be an annual incentive plan (AIP). However, prevalence of AIPs dropped to 77% in 2017 from 86% in 2015