Smart Business Solutions - HR

The 5 Elements of an Effective Incentive Plan

Competitive compensation strategies for the growing company

Written by Kat Tancock

It’s easy to forget that when you’re interviewing potential employees, they’re assessing you, too. And for a small business who might not be able to compete with bigger entities on salary or prestige, incentive plans can be a key factor in recruiting top candidates.

But how do you offer enticing incentives without overspending? Here are some practical ideas for developing incentive plans that work.


Let’s be real: no matter how engaged and high-performing the employee, they’re not in this for their health—they’re exchanging their time and effort for your cash. So why not make that relationship a more obvious one?

“Make sure you pay fairly,” says Cissy Pau, principal consultant at Clear HR Consulting in Vancouver. “Then make your bonus piece really tied to company performance.”

By setting clear company objectives and offering employees a significant cash bonus if and when they’re reached, you’re effectively boosting potential salaries at little risk to your bottom line, Pau says. Achieving your objectives will, ideally, correspond with greater revenue. “If the company achieves these objectives,” notes Pau, “we assume the company is doing well and it makes sense to share the wealth.”


Career-oriented employees will always be looking for ways to improve their skill set. And while offering to pay tuition costs is one (potentially expensive) option, it’s not the only one.

“You can bring an instructor into the office and offer training that’s valuable to a number of employees,” suggests Lisa Kay, owner of Peak Performance Human Resources Corp. in Toronto. This way, not only are costs lower than having each employee train separately, you can have stronger input in the skills being learned —and how they impact your company’s current needs and challenges.


“The beauty of being a small business is you have a lot of flexibility,” says Pau. And while some employees are happy with a basic nine-to-five schedule, many others will appreciate leeway.

For parents with young children, that might mean be able to leave early for daycare pickups in exchange for being available on email later in the evening; for hardcore skiers, maybe it’s a few mornings off on big powder days with time made up on the weekends. “The best incentives are things that your employees value and appreciate,” Pau says.


“Employees are often at different stages in their lives,” Pau notes. “You don’t want to get into a blanket approach—everybody gets a bonus, or everybody gets a smartphone.”

That said, the concept of fairness is going to come into play, and she suggests following the example of one of her clients and evening things out with a dollar limit, say, $2,000 or $5,000 of flex spending for the year on top of a basic benefits plan. Whether employees choose to spend that amount on health care, their RRSP, a fitness plan or simply take it in cash is up to them, but this flexibility is built on top of consistent parameters. “Employees will have a better appreciation because it’s meaningful to them,” Pau adds.


Especially when there are generation gaps, it can be hard to know what will truly keep employees happy, so Kay suggests doing a survey—either anonymously or in “an honest huddle”—to let your team come up with ideas for rewards.

“You need to come up with creative things that are intriguing and motivating,” she says, and her experience with clients is that asking staff what would work for them is a positive exercise for everyone involved. “I always encourage transparency and communication,” she adds. “Then, when those things come up, they’ll be able to draw that connection.”


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