Short term Incentives

Types of Short Term Incentive (STI) Plans

Short term incentive plans include:

• Target based plans (the most frequently used for executives),
• Profit sharing plans,
• Gainsharing plans,
• Bonus plans,
• Sales incentive plans,
• Bonus bank plans.

Short term incentives need periodic review as it is common for plans to evolve through modification after they have been in place for a number of cycles and for such evolution to lead to defects in their operation.

As participants and award opportunities are usually determined as part of the remuneration strategy the design aspects typically covered in STI reviews include:

• measurement period
• performance measures or KPIs
• weighting of performance measures,
• standards of performance,
• performance gates,
• payout opportunities,
• form of payment e.g. cash, super, shares etc,
• change of role during measurement period,
• new hires & promotions,
• termination of employment.