Glossary
Incentive Pay
Meaning & Definition
Incentive pay means any extra payment made to employees as an incentive for performance, meeting goals, efficiency, or achievements by the company. Incentive pay accompanies basic pay as a reward for motivating employees to perform better.
Important Features of Incentive Pay
- Encourages higher standards for employee performance.
- Improves production and organizational efficiency.
- Promotes employee participation and job satisfaction.
- Assists in rewarding outstanding performers within an organization.
- Enhances a performance-based work environment.
Statutory & Policy Alignment
Incentive Pay could be controlled by:
- Bonus Payment Act, 1965 (if incentives are considered statutory bonuses).
- Income Tax Act, 1961 (incentives are treated as taxable income from salary earnings).
Companies must establish clear incentive schemes, eligibility, and payment conditions within their policy framework.
