What plans are designed to link employee rewards to improved company performance?

Incentive compensation plans are specifically designed to align employee rewards with improvements in company performance. These plans typically link financial incentives, such as bonuses or commissions, to measurable outcomes that benefit the organization, such as sales targets, productivity increases, or cost reductions. The intent is to encourage employees to contribute positively to the company's objectives and enhance overall performance by directly tying their rewards to the successful achievement of those goals.

Gainsharing plans also serve a similar purpose, as they focus on sharing the financial benefits of improved performance with employees. Under a gainsharing plan, employees are rewarded based on the company's performance improvements, fostering a collaborative environment. This approach not only motivates individual employees but also encourages teamwork and collective effort in achieving performance goals.

Performance reviews, while crucial for assessing employee contributions, do not inherently serve to link rewards to company performance in the way that incentive compensation and gainsharing plans do. Similarly, retirement plans, which are focused on long-term savings for employees, do not directly address the alignment of rewards with immediate company performance enhancements.