Incentives have grown in popularity across a wide spectrum of employing organizations worldwide, particularly since the mid-1980s. The motivating effect of 'extra income' has enjoyed growing interest even in times of recession. Incentive payment schemes represent an attempt to influence the behaviour, and therefore work performance, of employees through the provision of a monetary or non-monetary reward which is extra to basic remuneration. This reward is assumed to bring forward a level of contribution to the company which is greater than that normally forthcoming in return for basic pay. Such payments, or bonuses, can be made for extra effort on the shop floor, shouldering extra responsibility in the office, selling more than quota in the sales division or achieving increased profits in the boardroom. In one form or another, therefore, incentive schemes can be applied to all categories of work.

Incentive schemes have proved more popular in the UK than in any other industrial nation. By way of contrast, in the USA remuneration policies and practices have tended to concentrate on remuneration as a whole. Pay is thus for the job and any performance or contribution expected of employees is not generally linked to some unique element such as an incentive payment. In the UK incentives have been linked to individual or group performance criteria. In the USA pay has been linked to business strategy as an integral part of human resource management, not as some separate motivating incentive-based strategy. In Europe incentives are less popular than in the UK, with more emphasis given to structure and equity. Interestingly, the newer Third World industries, which use incentive payments extensively, parallel British industry conditions of the early twentieth century when shop-floor incentives grew apace. In some industries incentives represent a considerable proportion of the task of managing remuneration. For the individual on incentive the payment can represent a significant element of earnings. For the trade unions incentives are a subject for negotiation. For management the incentive scheme is deemed to offer some hope of a reduction in unit costs of production or in more general terms an improvement in corporate well-being. Unfortunately, translating an incentive effect into some measure of improvement in corporate performance has proved difficult and it is a paradox that reward for employee performance is very rarely linked to the strategic approach to company objective achievement.

Ian Smith