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The Compensation Handbook, Sixth Edition: A State-of-the-Art Guide to Compensation Strategy and Design, 6th Edition by Dorothy Berger, Lance Berger

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15

Choosing the Incentive Compensation Program that Best Promotes Performance

LINDA E. AMUSO

Radford, an Aon Hewitt Company

The importance of incentive compensation or variable pay in a company’s total rewards program has continued to grow as companies aim to align pay with performance and manage expenses. Incentive compensation can take on different forms, but generally, it refers to the payment of variable compensation that rewards achievement of specified results, typically measured over a period of 12 months or less. As one component of a company’s total rewards program (including base salary, short- and long-term incentives, equity, benefits, and learning and development), incentives can be the most effective form of compensation in building ...

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