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What is Incentive Pay?

What is incentive pay?

Incentive pay is a payment system that is based on rewarding employees for their performance instead of the number of hours that they work. The focus of incentive pay is to motivate employees to focus on outcomes as opposed to the amount of time that they work. This type of compensation, in turn, should increase productivity.

One of the most well-known forms of incentive pay is the commission that a sales team or an individual sales representative receives after each sale. 

Incentives are not always monetary; they can also take the form of gift certificates, company equity, vacations, etc.