You are on page 1of 11

{Company Name}

Incentive Plan Policy

Jan 2011

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

Table of contents
1. Definitions....................................................................................................................3
2. Scope...........................................................................................................................3
3. Policy............................................................................................................................3
4. Guidelines...................................................................................................................4
5. Accountability..............................................................................................................6
6.Procedures...................................................................................................................7
7. Forms...........................................................................................................................8
8. Approvals...................................................................................................................10
9. Appendixes................................................................................................................11

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

1. Definitions
1.1 Senior managers: Regardless the actual titles, the senior manager within
{Company Name} accountable for establishing the direction of {Company Name} by
participating in its strategic plan, and overall objectives.
1.2 Managers: Regardless the actual titles manager within {Company Name}
accountable for directing a function and/or has a supervisors reporting to him/his.
1.3 Supervisors: Regardless the actual titles, supervisors are individuals
accountable for directing the employees performing the actual work of a function.
1.4 Performance measures: objectives assigned to senior managers, managers, and
supervisors.
1.5 Incentive scales: Predefined degrees, an employee can get a specific degree
achieving a predefined performance measure.

2. Scope:
This policy and procedure applies to all Full-Time employees in {Company Name} .

3. Policy
It is the policy of {Company Name} to provide competitive incentives to motivate its
employees to do their best and align their contributions to help {Company Name} in
achieving success.
Incentive plan policy will be implemented systematically on equitable and merit
basis.

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

4. Guidelines
4.1 All performance measures and incentive scales should be approved before 1 st
of January.
4.2 All performance measures:
4.2.1 Should be specific, measurable, achievable, realistic, and time-frame.
(SMART Measurers).
4.2.2 Should not be more than 8 eight measures.
4.2.3 Should not be less than 4 four measures.
4.2.4Should not be submitted before an employee gets inputs from his/her
manager.
4.3 Any employee joining after 1st of January will be eligible to an incentive plan
policy as a percentage from date of hire.
4.4 The maximum incentive entitlement of any eligible employee cannot exceed
four gross salaries. Any exceptions will need to be approved by the General
Manager.
4.5 All Incentives will be calculated based on the gross salary of the previous
fiscal year.
4.6 In case of employee resignation / termination, he will not be eligible to the
incentive plan policy. Exceptions to this policy will need to be approved by the
General Manager.
4.7 Senior managers should submit their performance measures before 1 st of
october.
4.8 Managers should submit their performance measures before 1 st of november.
4.9 Supervisors should submit their performance measures before 1 st of
december.
4.10 All performance measures should be approved after one week from date of
submitting them.
4.11 Incentive scales determined at the same time of approving performance
measures.
4.12 Incentive plan policy forms should be saved in a master incentive file in
human resources department, and copies published to eligible employees.

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

4.14 Incentive Payment


The formula for calculating an incentive payment is:
Incentive Payment =
Employee Gross Salary X company performance rate X employee performance rate
Where is:
4.14.1 Employee gross salary =

Basic salary + transport allowance + special allowance + cash allowance


4.14.2 Company performance rate:

To determine the company performance rate we should predefine the following:


1.The Company performance measure or measures and the related incentives scale.
2. The actual company performance.
The company performance rate should not exceed the following:
Actual Performance
Exceeds Expectation

Actual Performance Meets


Expectation

Actual Performance
Below Expectation

.5

4.14.3 Employee performance rate:

To determine an employee performance rate we should predefine the following:


1. An employee performance measures and the related incentives scale.
2. The actual employee results rate in related to performance measures.
3. The actual employee performance in related to performance appraising.
Employee performance rate = Appraising Rate + Results Rate
Apprising rate should not exceed the following:
Appraising

Rate

.75

.5

.25

Maximum results rate should not exceed the following:


Grades

1 And 2

3 And 4

5-7

Results Rate

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

5. Accountability
5.1 Board of Directors is accountable for:
5.1.1 Approving the company performance measure/s and the related
incentives scales
5.2 Senior management committee is accountable for:
5.2.1 Setting the company performance measure/s and the related
incentives scales.
5.3 General manger is accountable for:
5.3.1 Approving all senior managers performance measure/s and the related
incentives scales.
5.4 Senior mangers are accountable for:
5.4.1 Setting their performance measure/s and the related incentives scales.
5.4.2 Approving all managers performance measure/s and the related
incentives scales.
5.5 Mangers are accountable for:
5.5.1 Setting their performance measure/s and the related incentives scales.
5.5.2 Approving all Supervisors performance measure/s and the related
incentives scales.
5.6 Supervisors are accountable for:
5.6.1 Setting their performance measure/s and the related incentives scales.
5.7 Human Resources are accountable for:
5.7.1 Ensuring the compliance of this policy.
5.7.2 Publishing all necessary forms.

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

6. Procedures
Code Accountable

6.1

Board of
Directors

6.2

Senior
Management
Committee

Procedure
6.1.1 Approve the company performance measure/s and incentive
scales.
6.1.2 Submit the company performance measure/s and incentive
scales to senior management committee.

6.2.1 Sets the company performance measure/s and incentive scales


to general manager.

6.3.1 Receive an incentive plan form from HR Department.

6.3

Supervisor*

6.3.2 Fill an incentive plan form with participation with your


employee.
6.3.3

6.4

6.5

Eligible
Employee

HR
Department

Submit an incentive plan form to HR Department.

6.4.1 Participate with your supervisor in filling an incentive plan form.

6.5.1

Send incentive plan forms supervisors.

6.5.2

Keep incentive plan forms in a master file.

6.5.3

Distribute the previous incentive plan forms at apprising date.

* For procedures purposes supervisor defined as: any person supervise an eligible
employee.

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

7. Forms
7.1 Incentive plan form. (See Page Number 9 )
7.2 Employee apprising form. (See Policy Number HR007:Performance Apprising)

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

Incentive Plan Form


Employee Number (----------)

Department / Division -------------------------

Employee Name --------------------------------

Supervisor Name -------------------------------

Performance
Measure

Baseline
Performance

Predefined Scales
Performance

Incentive

Actual
Performance

Incentive

TOTAL
INCENTIVE
SCALES

ACTUAL
INCENTIVE

Employee Signature -----------------------------------

Date --------------------

Supervisor Signature ----------------------------------

Date --------------------

Employee Signature -----------------------------------

Date --------------------

Supervisor Signature ----------------------------------

Date --------------------

8. Approvals

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

Policy Name: Incentive Plan


Policy Number: HR005

Name

Effective Date: 01/01/2011


Edition: One

Signatures

Dates

Mr. {Name}
General Manager

Mr. {Name}
Assistant General Manager

Mr. {Name}
Assistant General Manager
(Manufacturing)

Mr. {Name}
Financial Manager

Mr. {Name}
Internal Auditor

Mr. {Name}
Sales Manager

Mr. {Name}
{Title}

9. Appendixes

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

10

Policy Name: Incentive Plan


Policy Number: HR005

Effective Date: 01/01/2011


Edition: One

Sample Incentive Plan Form


Employee Number (363)

Department / Division Human Resources

Employee Name {Name}

Supervisor Name {Name}

Performance
Measure

Increasing
Training
Participation Rate

Decreasing
Injuries Rate

Decreasing
Turnover Rate

Decreasing
Absence Rate

Baseline
Performance

10%

37%

1.2%

2.5%

Total

INCENTIVE
SCALES

ACTUAL
INCENTIVE

Predefined Scales
Performance

Incentive

40% +

0.30

21% - 40%

0.20

11% - 20%

0.10

10% and Below

0.00

Below 15%

0.20

15% - 24%

0.10

25% - 30%

0.05

More than 30%

0.00

Below 0.8%

0.30

0.8% 0.99%

0.20

1.00% - 1.2%

0.10

More than 1.2%

0.00

Below 2%

0.20

2.00% 2.24%

0.10

2.25% 2.5%

0.05

More than 2.5

0.00

Actual
Performance

Incentive

35%

0.20

25%

0.05

0.95%

0.20

2.15%

0.10

1.00

0.55

Employee Signature -----------------------------------

Date --------------------

Supervisor Signature ----------------------------------

Date --------------------

Employee Signature -----------------------------------

Date --------------------

Supervisor Signature ----------------------------------

Date --------------------

123HR.blogspot.com. Tel. 962-79-47474442 Amman - Jordan

11