The Long and Short of Short-Term Incentives

Whether it’s a holiday bonus, performance bonus, sales incentive, or other reward program, short-terms incentives are a sure fire way of energizing any workforce. From the factory floor to the C-suite, employees everywhere are motivated by the promise of an (almost) immediate payoff.

But how should modern HR professionals think about and structure short-term incentives for their organization? Is there a single framework for STIs that all companies should model, or should they simply look for a set of best practices that guide the way?

Unfortunately, the answer varies. As organizations advance and HR structures adapt to local conditions and markets, many HR professionals have found that there is no one-size-fits all solution for STIs. However, around the world, there are some shared traits in the way STIs are structured and implemented:

STIs may be more popular in expanding markets

While the Asian markets may have cooled some since their boom years in previous decades, growth in these markets continues to outpace that in other regions in the world. Unsurprisingly, employers in this region are also more likely to offer short-term incentives to their employees, with managers in the Asia Pacific being nearly 10% more likely to be eligible for STIs than their counterparts in Europe, the Middle East, and Africa. In high-growth markets, it seems that employers are willing to pay a premium for production.

Once you’re in the club, geography doesn’t matter

While eligibility for STIs varies by region, the amount offered does not. Measured as a percentage of base salary, there is little difference in the value of STIs offered to employees at any given career level around the world (i.e., an experienced professional in the Americas is likely to be receive the same STI as their colleague in the Asia Pacific). There is, however, one notable exception: STIs for executives in the Americas area nearly twice what they are elsewhere in the world!

Around the world, employees hit their mark

The beauty of STIs is that they’re a win-win for both employee and employer. Employees benefit by increased compensation, and employers enjoy greater productivity and (ideally) profitability. That’s why it should be no surprise that employees at all career levels in all regions generally meet their goals and receive their targeted STI value.

 

Although short-term incentives should ultimately be tailored to your organization’s structure, market, and mission, it helps to know that employers around the world have found some common ground for these highly variable and high-impact workforce management tools. For any HR professional tasked with designing their own organization’s short-term rewards policy, the next step might be a little more tricky: deciding who does and does not qualify for rewards…

Interested in learning more about short-term incentive programs? Don’t miss Mercer’s Short-Term Incentives Around the World publication, the results of a global survey on short-term incentives by career level, job family, and region.

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