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HR must adapt to growing trend of incentive-based pay structure

Posted on December 19th, 2011 Read time: 1 minutes

There has been a shift in how companies set up compensation for employees, with an increased emphasis placed on performance targets and incentive programs, according to a recent study from consultancy firm Pearl Meyer & Partners.

The study focused on 190 organizations ranging from Fortune 50 companies to emerging high-growth firms. Specifically, 42 percent of respondents expect to raise their performance level standards in 2012. This is fairly consistent with the 49 percent who stated they would do so in 2011, and the 41 percent in 2010.

"Both the survey results and our client work point to a recognition by corporate leaders that linking pay to performance is absolutely essential – and that they're less than satisfied with their current programs in that regard," said Jim Heim, managing director of Pearl Meyer & Partners.

It may be up to HR administration to create effective incentive-based models, ensuring that they "strike a delicate balance between performance and retention," Heim adds.

A similar study from Towers Watson found that around 58 percent of 265 mid-size and large corporations studied expect to fund annual incentive plans at or above target levels, HREOnline reports

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